1.) [G.R. NO.

178236 : June 27, 2008]

OLIGARIO SALAS, Petitioner, v. ABOITIZ ONE, INC., and SABIN ABOITIZ, Respondents.

DECISION

NACHURA, J.:

Petitioner Oligario Salas (Salas) appeals by certiorari the January 31, 2007 Decision1 of the Court of
Appeals (CA) in CA-G.R. SP No. 93947 and CA-G.R. SP No. 94145, and its June 13, 2007
Resolution2 denying his motion for reconsideration.

Salas was hired as assistant utility man by respondent Aboitiz One, Inc. (Aboitiz) on May 11, 1993,
and was initially assigned at the Maintenance Department-Manila Office. He rose from the ranks and
became material controller on February 22, 2000 under the Materials Management & Operations
Team. As material controller, Salas was tasked with monitoring and maintaining the availability and
supply of Quickbox needed by Aboitiz in its day-to-day operations.

On June 4, 2003, Salas had run out of Large Quickbox, hampering Aboitiz's business operation. The
following day, June 5, 2003, Aboitiz wrote Salas a memorandum requiring the latter to explain in
writing within seventy-two (72) hours why he should not be disciplinarily dealt with for his (i) failure
to monitor the stock level of Large Quickbox which led to inventory stock out; and (ii) failure to
report to [his] immediate superior the Large Quickbox problem when the stock level was already
critical, when the Large Quickbox level was near stock out, and the stock level had a stock out.3

On June 10, 2003, an administrative hearing was conducted to give Salas ample opportunity to
explain his side. Salas' explanation, however, was not convincing because on July 2, 2003, Aboitiz
sent him a decision notice4 which reads:

Dear Mr. Salas:

In connection with the administrative investigation conducted on June 10, 2003 related to your
alleged gross negligence of duties and responsibilities, the following are the findings during the said
investigation:

1. Although you repeatedly made follow-up to the [supplier], you failed to elevate the critical
situation to the attention of your leaders resulting to the stock out of a critical stock;

2. Your case was aggravated by your tampering of the Bin Card by changing the date of stock from
May 31 to June 2, 2003 to cover up your negligence and mislead the investigating team;

3. The stock out incident had a negative impact to the company in terms of revenue and goodwill to
clients.

Your position as Warehouseman is vested with trust and confidence by the company for the reason
that you are in-charge of safekeeping and monitoring of the company's operational supplies and
ensuring that these are available anytime.

In consideration of the results of the investigation you are hereby terminated from the company for
loss of trust and confidence effective July 15, 2003.

Accordingly, you are hereby directed to report to the Human Resource Office for your final clearance
of money and property accountabilities, and obligations.

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For your information and compliance.

Sincerely yours

(Signed)

PAUL HAMOY
Team Leader, Purchasing
Aboitiz One, Inc.

Salas thereafter sent a letter to Mr. Hamoy requesting reconsideration of the management's decision
stating:

Sir,

I would like to appeal for humanitarian reason on the decision of the management terminating me
from service.

1. I would like to ask if I could avail of the early retirement plan since I was able to work for the
company for 10 years, it is very hard for me that I be terminated after working for that long years in
A1, the money I will get from retirement plan will be use[d] for my family expenses for at least a
couple of months until I got a new job, pls. spare my family.

2. If you can't grant #1 appeal can you please allow me to tender my resignation instead of being
terminated by the company;

3. If I can stay up to July 31, 2003, so I can have enough time to look for another job and I can earn
enough money to support my family [for] at least another month in our everyday expenses.

thanks, ohlee salas.5

Mr. Hamoy replied via electronic mail (e-mail) denying Salas' request to avail himself of the
retirement plan or tender his resignation. He reasoned that the company's table of discipline provides
the penalty of dismissal for the offenses he committed. Salas was, however, granted an extension of
one (1) month or until August 15, 2003 to work with the company, if he so desired.6

Claiming termination without cause, Salas filed with the Labor Arbiter a complaint against Aboitiz and
its president Sabin Aboitiz for illegal dismissal with prayer for reinstatement, and for payment of full
backwages, moral and exemplary damages, as well as attorney's fees.

Aboitiz responded that there was valid termination. It asserted that Salas was dismissed for just
cause and with due process. It claimed Salas willfully breached his duty when Aboitiz ran out
of Large Quickbox, justifying the termination of his employment.7

On February 19, 2004, the Labor Arbiter rendered a Decision8 sustaining the validity of Salas'
dismissal. The Arbiter agreed with Aboitiz that Salas had been remiss in his duty as material
controller when he ran out of Large Quickbox on June 4, 2003. The Arbiter further declared that
Aboitiz was justified in imposing the ultimate penalty of dismissal, considering Salas' previous
infractions.

On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiter. But noting
that Salas was not entirely faultless, the NLRC denied his prayer for backwages, and ordered the
payment of separation pay instead of reinstatement. The NLRC ratiocinated, thus:

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Under the Labor Code, gross negligence is a valid ground for an employer to terminate an employee.
Gross negligence characterized by want of even slight care acting or omitting to act in a situation
where there is a duty to act, not inadvertently but willfully and intentionally with a conscious
indifference to consequence insofar as other persons may be affected (Tres Reyes v. Maxim's Tea
House, 398 SCRA 288). It is for this reason that We disagree with the finding of the Labor Arbiter
that [Salas] is guilty of gross negligence because [Salas] did his duty to make proper requisition in
advance. If there is anyone to blame for failure to deliver to the requisitioner [Salas], the
requisitioned items, it should be the purchasing officer who should have made the corresponding
explanation, and to bear the consequences if his explanation is implausible. If ever [Salas] failed to
follow-up, it does not follow that he is remiss in his duty, as the duty to deliver the requisitioned
items is already on the purchasing officer. Moreover, [Salas] explained during the hearing that he
made follow-ups. What puzzles Us is, why did not the management require the Circle Team and the
Purchasing Officer to explain. Such omission, to Our mind, indicates discrimination against [Salas].

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

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

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

The alleged failure of [Salas] to account for alleged unused accountable forms in the amount
of P57,850.00 cannot be used as justification for [Salas'] dismissal. This charge came out after Salas'
dismissal for which [Salas] was not surely given an opportunity to be heard. Additionally, [no]
substantial evidence was presented to establish such charge. by mere certification of Pablo Osit (sic).
How Mr. Osit arrived at such figure is not even explained.9

Aboitiz filed a motion for reconsideration, while Salas sought partial reconsideration of the decision,
both of which were denied by the NLRC on January 24, 2006.

Salas and Aboitiz thereupon filed their respective petitions for certiorari with the Court of Appeals
(CA), docketed as CA-G.R. SP No. 93947 and CA-G.R. SP No. 94145, respectively. Salas questioned
the denial of his prayer for backwages and other monetary benefits, and the order directing payment
of separation pay instead of reinstatement. Upon the other hand, Aboitiz faulted the NLRC for not
sustaining the validity of Salas' dismissal.

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

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

The CA disposed, thus:

WHEREFORE, the petition of Aboitiz One, Inc. is GRANTED. The NLRC's decision dated September
21, 2005 and resolution dated January 24, 2006, are SET ASIDE and the complaint below
is DISMISSED for being without merit.

SO ORDERED.11

Salas filed a motion for reconsideration, but the CA denied it on June 13, 2007.

Aggrieved by the resolutions of the CA, Salas comes to this Court positing that:

THE HON. COURT OF APPEALS SERIOUSLY ERRED IN LAW AND COMMITTED MISAPPREHENSION OF
FACTS IN REVERSING THE NLRC DECISION INSTEAD OF MODIFYING IT TO INCLUDE BACKWAGES
ON MERE GROUND OF A SINGLE AND SIMPLE NEGLIGENCE WHICH IS NOT A GROUND FOR
DISMISSAL. SIMILARLY, THIS CANNOT BE THE BASIS OF DISMISSAL ON GROUND OF LOSS OF
TRUST AND CONFIDENCE.12

The Court shall deal first with the procedural issue.

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

Contrary to Aboitiz's assertion, the petition substantially complies with the requirements set forth by
the Rules of Court. Salas submitted a duplicate original of the assailed Decision13 and Resolution14 of
the CA, as well as copies of the material portions of the record referred to in the petition.15

Likewise, he indicated in his petition the material dates showing that the petition was filed on time.
He alleged that he received the assailed CA Decision on February 9, 2007 and filed a motion for
reconsideration on February 19, 2007, which was denied by the CA in its June 13, 2007 Resolution.
The Resolution denying his motion for reconsideration was received on June 15, 2007.16

There is also no dispute that Salas had complied with the requirement of the rules on the certification
of non-forum shopping. Salas certifies that he did not commence any case based on similar cause of
action before any Court, quasi-judicial body or tribunal. He also averred that:

[t]here is no pending case similar to this case before the Supreme Court, the Court of Appeals (or
any of its Division) quasi-judicial bodies or any tribunal, and should I thereafter learn, that the same
or similar action or claim has been filed or is pending, I shall report that fact within five (5) days
Labor II – 1
therefrom to this Hon. Court of Appeals wherein this initiatory pleading has been filed pursuant to
Section 5, Rule 7 paragraph (c) of the Revised Rules of Court.17

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

Besides, it has been our consistent holding that the ends of justice are better served when cases are
determined on the merits - after all, parties are given full opportunity to ventilate their causes and
defenses - rather than on technicality or some procedural imperfections.18 Aboitiz's plea for the
outright dismissal of the petition cannot, therefore, be sustained.

Having resolved the procedural issue, we proceed to the merits of the case.

As stated in the decision notice,19 Salas was terminated for neglect of duty and willful breach of trust.
Gross negligence connotes want or absence of or failure to exercise slight care or
diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them. To warrant removal from service,
the negligence should not merely be gross, but also habitual.20

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

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

The CA also justified Salas' dismissal on ground of willful breach of trust. It lent credence to Aboitiz's
posture that Salas was a warehouseman holding a position of trust and confidence, and that he
tampered with the bin card to cover up [his] negligence and [to] mislead the investigating team.

We disagree.

A position of trust and confidence was explained in Panday v. NLRC,22 viz.:

The case of Lepanto Consolidated Mining Co. v. Court of Appeals 1 SCRA 1251 (1961), provides us
with a definition of a "position of trust and confidence." It is one where a person is "entrusted with
confidence on delicate matters," or with the custody, handling, or care and protection of the
employer's property.

A few examples were given by the Court in the case of Globe-Mackay Cable and Radio Corporation v.
National Labor Relations Commission and Imelda Salazar, G.R. No. 82511, March 3, 1992, to
illustrate the principle:

x x x where the employee is a Vice-President for Marketing and as such, enjoys the full trust and
confidence of top management (Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]); or
Labor II – 1
is the Officer-In-Charge of the extension office of the bank where he works (Citytrust Finance Corp.
v. NLRC, 157 SCRA 87 [1988]); or is an organizer of a union who was in a position to sabotage the
union's efforts to organize the workers in commercial and industrial establishments (Bautista v.
Inciong, 158 SCRA 665 [1988]); or is a warehouseman of a non-profit organization whose primary
purpose is to facilitate and maximize voluntary gifts by foreign individuals and organizations to the
Philippines (Esmalin v. NLRC, 177 SCRA 537 [1989]); or is a manager of its Energy Equipment Sales
(Maglutac v. NLRC, 189 SCRA 767 [1990])."

In fact, the classification of a Credit and Collection Supervisor by management as

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

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

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

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

Besides, as we review the records before us, we do not see any semblance of willful breach of trust
on the part of Salas. It is true that there was erasure or alteration on the bin card. Aboitiz, however,
failed to demonstrate that it was done to cover up Salas' alleged negligence. Other than the bin card
and Aboitiz's barefaced assertion, no other evidence was offered to prove the alleged cover-up.
Neither was there any showing that Salas attempted to mislead the investigating team. The CA,
therefore, erred in adopting Aboitiz's unsubstantiated assertion to justify Salas' dismissal.

Indeed, an employer has the right, under the law, to dismiss an employee based on fraud or willful
breach of the trust bestowed upon him by his employer or the latter's authorized representative.
However, the loss of trust must be based not on ordinary breach but, in the language of Article
282(c) of the Labor Code, on willful breach. A breach is willful if it is done intentionally, knowingly
and purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and not on the
employer's arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally
remain at the mercy of the employer. It should be genuine and not simulated; nor should it appear
as a mere afterthought to justify an earlier action taken in bad faith or a subterfuge for causes which
are improper, illegal or unjustified. It has never been intended to afford an occasion for abuse
because of its subjective nature. There must, therefore, be an actual breach of duty committed by
the employee which must be established by substantial evidence.24 In this case, Aboitiz utterly failed
to establish the requirements prescribed by law and jurisprudence for a valid dismissal on the ground
of breach of trust and confidence.

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

As aptly found by the NLRC, the charge came only after Salas' dismissal. We also note that the
subject accountable forms were issued to Salas in 2001. Inexplicably, this alleged infraction was
never included as ground in the notice of termination. It was only on November 23, 2003 or three (3)
months after the filing of the complaint for illegal dismissal that Aboitiz asserted that Salas failed to

Labor II – 1
account for these unused accountable forms amounting to P57,850.00. It is clear that such assertion
of serious misconduct was a mere afterthought to justify the illegal dismissal.

Similarly, before the Labor Arbiter, NLRC, and CA, Aboitiz's arguments zeroed in on Salas' alleged
neglect of duty and breach of trust. It was, therefore, error for the CA to include serious misconduct,
which had never been raised in the proceedings below, as ground to sustain the legality of Salas'
dismissal.

The CA also cited another infraction allegedly committed by Salas as additional ground for his
dismissal. It declared that Salas unauthorizedly sold the company's eight units of used air-
conditioners. Yet, we note that Salas had never been charged or suspended for this alleged
unauthorized sale of used air-conditioners during his employment with Aboitiz. The infraction for
which Salas had been penalized by suspension of five (5) days was his failure to meet the security
requirements of the company.25 Accordingly, there is no basis for the CA to include unauthorized sale
of used air-conditioners as ground to sustain Salas' dismissal.

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

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

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

Undoubtedly, no just cause exists to warrant Salas' dismissal. Consequently, he is entitled to

reinstatement to his former position without loss of seniority rights, and to payment of backwages.31

However, we limit the award of backwages because we find that Salas was not entirely faultless. As
earlier adverted to, Salas failed to promptly inform his immediate superior of the non-delivery of the
requisitioned items. Had Salas promptly informed Ed Dumago of the non-delivery, the incident
complained of would have been avoided. Although such negligence would not justify Salas'
termination from employment in view of the stringent condition imposed by the Labor Code on
termination of employment due to gross and habitual neglect, the same cannot be condoned, much
less tolerated.

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

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-
G.R. SP No. 93947 and CA-G.R. SP No. 94145, are REVERSED and SET ASIDE. Aboitiz One, Inc. is

Labor II – 1
ordered to REINSTATE Oligario Salas to his former position without loss of seniority rights, with
payment of backwages computed from September 21, 2005, up to the time of reinstatement.

Labor II – 1
 2.) [G.R. NO. 153510 : February 13, 2008]

R.B. MICHAEL PRESS and ANNALENE REYES ESCOBIA, Petitioners, v. NICASIO C.

GALIT, Respondent.

DECISION

VELASCO, JR., J.:

The Case

Year in, year out, a copious number of illegal dismissal cases reach the Court of Appeals (CA) and
eventually end up with this Court. This Petition for Review under Rule 45 registered by petitioners
R.B. Michael Press and Annalene Reyes Escobia against their former machine operator, respondent
Nicasio C. Galit, is among them. It assails the November 14, 2001 Decision of the CA in CA-G.R. SP
No. 62959, finding the dismissal of respondent illegal. Likewise challenged is the May 7, 2002
Resolution denying reconsideration.

The Facts

On May 1, 1997, respondent was employed by petitioner R.B. Michael Press as an offset machine
operator, whose work schedule was from 8:00 a.m. to 5:00 p.m., Mondays to Saturdays, and he was
paid PhP 230 a day. During his employment, Galit was tardy for a total of 190 times, totaling to
6,117 minutes, and was absent without leave for a total of nine and a half days.

On February 22, 1999, respondent was ordered to render overtime service in order to comply with a
job order deadline, but he refused to do so. The following day, February 23, 1999, respondent
reported for work but petitioner Escobia told him not to work, and to return later in the afternoon for
a hearing. When he returned, a copy of an Office Memorandum was served on him, as follows:

To : Mr. Nicasio Galit

From : ANNALENE REYES-ESCOBIA
Re : WARNING FOR DISMISSAL; NOTICE OF HEARING

This warning for dismissal is being issued for the following offenses:

(1) habitual and excessive tardiness

(2) committing acts of discourtesy, disrespect in addressing superiors

(3) failure to work overtime after having been instructed to do so

(4) Insubordination - willfully disobeying, defying or disregarding company authority

The offenses you ve committed are just causes for termination of employment as provided by the
Labor Code. You were given verbal warnings before, but there had been no improvement on your
conduct.

Further investigation of this matter is required, therefore, you are summoned to a hearing at 4:00
p.m. today. The hearing wills determine your employment status with this company.

Labor II – 1
(SGD) ANNALENE REYES-ESCOBIA
      Manager1

On February 24, 1999, respondent was terminated from employment. The employer, through
petitioner Escobia, gave him his two-day salary and a termination letter, which reads:

February 24, 1999

Dear Mr. Nicasio Galit,

I am sorry to inform you that your employment with this company has been terminated effective
today, February 24, 1999. This decision was not made without a thorough and complete
investigation.

You were given an office memo dated February 23, 1999 warning you of a possible dismissal. You
were given a chance to defend yourself on a hearing that was held in the afternoon of the said date.

During the hearing, Mrs. Rebecca Velasquez and Mr. Dennis Reyes, were present in their capacity as
Production Manager and Supervisor, respectively.

Your admission to your offenses against the company and the testimonies from Mrs. Velasquez and
Mr. Reyes justified your dismissal from this company,

Please contact Ms. Marly Buita to discuss 13th-Month Pay disbursements.

Cordially,

(SGD) Mrs. Annalene Reyes-Escobia2

Respondent subsequently filed a complaint for illegal dismissal and money claims before the National
Labor Relations Commission (NLRC) Regional Arbitration Branch No. IV, which was docketed as NLRC
Case No. RAB IV-2-10806-99-C. On October 29, 1999, the labor arbiter rendered a Decision,

WHEREFORE, premises considered, there being a finding that complainant was illegally dismissed,
respondent RB MICHAEL PRESS/Annalene Reyes-Escobia is hereby ordered to reinstate complainant
to his former position without loss of seniority rights and other benefits, and be paid his full
backwages computed from the time he was illegally dismissed up to the time of his actual
reimbursement.

All other claims are DISMISSED for lack of evidence.

SO ORDERED.3

On January 3, 2000, petitioners elevated the case to the NLRC and their appeal was docketed as
NLRC NCR CA No. 022433-00. In the April 28, 2000 Decision, the NLRC dismissed the appeal for lack
of merit.

Not satisfied with the ruling of the NLRC, petitioners filed a Petition for Certiorari with the CA. On
November 14, 2001, the CA rendered its judgment affirming with modification the NLRC's Decision,
thus:

WHEREFORE, the petition is DISMISSED for lack of merit. The Decision of public respondent is

accordingly modified in that the basis of the computation of the backwages, 13th month pay and

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incentive pay should be respondent's daily wage of P230.00; however, backwages should be
computed from February 22, 1999 up to the finality of this decision, plus the 13th month and service
incentive leave pay.4

The CA found that it was not the tardiness and absences committed by respondent, but his refusal to
render overtime work on February 22, 1999 which caused the termination of his employment. It
ruled that the time frame in which respondent was afforded procedural due process is dubitable; he
could not have been afforded ample opportunity to explain his side and to adduce evidence on his
behalf. It further ruled that the basis for computing his backwages should be his daily salary at the
time of his dismissal which was PhP 230, and that his backwages should be computed from the time
of his dismissal up to the finality of the CA's decision.

On December 3, 2001, petitioners asked for reconsideration5 but was denied in the CA's May 7, 2002
Resolution.

Persistent, petitioners instituted the instant petition raising numerous issues which can be
summarized, as follows: first, whether there was just cause to terminate the employment of
respondent, and whether due process was observed in the dismissal process; and second, whether
respondent is entitled to backwages and other benefits despite his refusal to be reinstated.

The Court's Ruling

It is well settled that findings of fact of quasi-judicial agencies, like the NLRC, are accorded not only
respect but even finality if the findings are supported by substantial evidence. This is especially so
when such findings of the labor arbiter were affirmed by the CA.6 However, this is not an iron-clad
rule. Though the findings of fact by the labor arbiter may have been affirmed and adopted by the
NLRC and the CA as in this case, it cannot divest the Court of its authority to review the findings of
fact of the lower courts or quasi-judicial agencies when it sees that justice has not been served, more
so when the lower courts or quasi-judicial agencies' findings are contrary to the evidence on record
or fail to appreciate relevant and substantial evidence presented before it.7

Petitioners aver that Galit was dismissed due to the following offenses: (1) habitual and excessive
tardiness; (2) commission of discourteous acts and disrespectful conduct when addressing superiors;
(3) failure to render overtime work despite instruction to do so; and (4) insubordination, that is,
willful disobedience of, defiance to, or disregard of company authority.8 The foregoing charges may
be condensed into: (1) tardiness constituting neglect of duty; (2) serious misconduct; and (3)
insubordination or willful disobedience.

Respondent's tardiness cannot be considered condoned by petitioners

Habitual tardiness is a form of neglect of duty. Lack of initiative, diligence, and discipline to come to
work on time everyday exhibit the employee's deportment towards work. Habitual and excessive
tardiness is inimical to the general productivity and business of the employer. This is especially true
when the tardiness and/or absenteeism occurred frequently and repeatedly within an extensive
period of time.

In resolving the issue on tardiness, the labor arbiter ruled that petitioners cannot use respondent's
habitual tardiness and unauthorized absences to justify his dismissal since they had already deducted
the corresponding amounts from his salary. Furthermore, the labor arbiter explained that since
respondent was not subjected to any admonition or penalty for tardiness, petitioners then had
condoned the offense or that the infraction is not serious enough to merit any penalty. The CA then
supported the labor arbiter's ruling by ratiocinating that petitioners cannot draw on respondent's
habitual tardiness in order to dismiss him since there is no evidence which shows that he had been
warned or reprimanded for his excessive and habitual tardiness.
Labor II – 1
We find the ruling incorrect.

The mere fact that the numerous infractions of respondent have not been immediately subjected to
sanctions cannot be interpreted as condonation of the offenses or waiver of the company to enforce
company rules. A waiver is a voluntary and intentional relinquishment or abandonment of a known
legal right or privilege.9 It has been ruled that "a waiver to be valid and effective must be couched in
clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right or
benefit which legally pertains to him."10 Hence, the management prerogative to discipline employees
and impose punishment is a legal right which cannot, as a general rule, be impliedly waived.

In Cando v. NLRC,11 the employee did not report for work for almost five months when he was
charged for absenteeism. The employee claimed that such absences due to his handling of union
matters were condoned. The Court held that the employee did not adduce proof to show condonation
coupled with the fact that the company eventually instituted the administrative complaint relating to
his company violations.

Thus it is incumbent upon the employee to adduce substantial evidence to demonstrate condonation
or waiver on the part of management to forego the exercise of its right to impose sanctions for
breach of company rules.

In the case at bar, respondent did not adduce any evidence to show waiver or condonation on the
part of petitioners. Thus the finding of the CA that petitioners cannot use the previous absences and
tardiness because respondent was not subjected to any penalty is bereft of legal basis. In the case
of Filipio v. The Honorable Minister Blas F. Ople,12 the Court, quoting then Labor Minister Ople, ruled
that past infractions for which the employee has suffered the corresponding penalty for each violation
cannot be used as a justification for the employee's dismissal for that would penalize him twice for
the same offense. At most, it was explained, "these collective infractions could be used as supporting
justification to a subsequent similar offense." In contrast, the petitioners in the case at bar did not
impose any punishment for the numerous absences and tardiness of respondent. Thus, said
infractions can be used collectively by petitioners as a ground for dismissal.

The CA however reasoned out that for respondent's absences, deductions from his salary were made
and hence to allow petitioners to use said absences as ground for dismissal would amount to "double
jeopardy."

This postulation is incorrect.

Respondent is admittedly a daily wage earner and hence is paid based on such arrangement. For said
daily paid workers, the principle of "a day's pay for a day's work" is squarely applicable. Hence it
cannot be construed in any wise that such nonpayment of the daily wage on the days he was absent
constitutes a penalty.

Insubordination or willful disobedience

While the CA is correct that the charge of serious misconduct was not substantiated, the charge of
insubordination however is meritorious.

For willful disobedience to be a valid cause for dismissal, these two elements must concur: (1) the
employee's assailed conduct must have been willful, that is, characterized by a wrongful and
perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the
employee, and must pertain to the duties which he had been engaged to discharge.13

In the present case, there is no question that petitioners' order for respondent to render overtime
service to meet a production deadline complies with the second requisite. Art. 89 of the Labor Code
Labor II – 1
empowers the employer to legally compel his employees to perform overtime work against their will
to prevent serious loss or damage:

Art. 89. EMERGENCY OVERTIME WORK

Any employee may be required by the employer to perform overtime work in any of the following
cases:

xxx

(c) When there is urgent work to be performed on machines, installations, or equipment, in order to
avoid serious loss or damage to the employer or some other cause of similar nature;

xxx

In the present case, petitioners' business is a printing press whose production schedule is sometimes
flexible and varying. It is only reasonable that workers are sometimes asked to render overtime work
in order to meet production deadlines.

Dennis Reyes, in his Affidavit dated May 3, 1999, stated that in the morning of February 22, 1999, he
approached and asked respondent to render overtime work so as to meet a production deadline on a
printing job order, but respondent refused to do so for no apparent reason. Respondent, on the other
hand, claims that the reason why he refused to render overtime work was because he was not feeling
well that day.

The issue now is, whether respondent's refusal or failure to render overtime work was willful; that is,
whether such refusal or failure was characterized by a wrongful and perverse attitude. In Lakpue
Drug Inc. v. Belga, willfulness was described as "characterized by a wrongful and perverse mental
attitude rendering the employee's act inconsistent with proper subordination."14 The fact that
respondent refused to provide overtime work despite his knowledge that there is a production
deadline that needs to be met, and that without him, the offset machine operator, no further printing
can be had, shows his wrongful and perverse mental attitude; thus, there is willfulness.

Respondent's excuse that he was not feeling well that day is unbelievable and obviously an
afterthought. He failed to present any evidence other than his own assertion that he was sick. Also, if
it was true that he was then not feeling well, he would have taken the day off, or had gone home
earlier, on the contrary, he stayed and continued to work all day, and even tried to go to work the
next day, thus belying his excuse, which is, at most, a self-serving statement.

After a re-examination of the facts, we rule that respondent unjustifiably refused to render overtime
work despite a valid order to do so. The totality of his offenses against petitioner R.B. Michael Press
shows that he was a difficult employee. His refusal to render overtime work was the final straw that
broke the camel's back, and, with his gross and habitual tardiness and absences, would merit
dismissal from service.

Due process: twin notice and hearing requirement

On the issue of due process, petitioners claim that they had afforded respondent due process.
Petitioners maintain that they had observed due process when they gave respondent two notices and
that they had even scheduled a hearing where he could have had explained his side and defended
himself.

We are not persuaded.

Labor II – 1
We held in Agabon v. NLRC:

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give
the employee two written notices and a hearing or opportunity to be heard if requested by the
employee before terminating the employment: a notice specifying the grounds for which dismissal is
sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice
of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283
and 284, the employer must give the employee and the Department of Labor and Employment
written notices 30 days prior to the effectivity of his separation.15

Under the twin notice requirement, the employees must be given two (2) notices before his
employment could be terminated: (1) a first notice to apprise the employees of their fault, and (2) a
second notice to communicate to the employees that their employment is being terminated. Not to
be taken lightly of course is the hearing or opportunity for the employee to defend himself personally
or by counsel of his choice.

In King of Kings Transport v. Mamac,16 we had the occasion to further elucidate on the procedure
relating to the twin notice and hearing requirement, thus:

(1) The first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the opportunity
to submit their written explanation within a reasonable period. "Reasonable opportunity" under the
Omnibus Rules means every kind of assistance that management must accord to the employees to
enable them to prepare adequately for their defense. This should be construed as a period of at least
five (5) calendar days from receipt of the notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer, gather data and evidence, and decide on
the defenses they will raise against the complaint. Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged
against the employees.

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

(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the
charge against the employees have been considered; and (2) grounds have been established to
justify the severance of their employment.

In addition, if the continued employment poses a serious and imminent threat to the life or property
of the employers or of other employees like theft or physical injuries, and there is a need for
preventive suspension,17 the employers can immediately suspend the erring employees for a period
of not more than 30 days. Notwithstanding the suspension, the employers are tasked to comply with
the twin notice requirement under the law. The preventive suspension cannot replace the required
notices.18 Thus, there is still a need to comply with the twin notice requirement and the requisite
hearing or conference to ensure that the employees are afforded due process even though they may
have been caught in flagrante or when the evidence of the commission of the offense is strong.

Labor II – 1
On the surface, it would seem that petitioners observed due process (twin notice and hearing
requirement): On February 23, 1999 petitioner notified respondent of the hearing to be conducted
later that day. On the same day before the hearing, respondent was furnished a copy of an office
memorandum which contained a list of his offenses, and a notice of a scheduled hearing in the
afternoon of the same day. The next day, February 24, 1999, he was notified that his employment
with petitioner R.B. Michael Press had been terminated.

A scrutiny of the disciplinary process undertaken by petitioners leads us to conclude that they only
paid lip service to the due process requirements.

The undue haste in effecting respondent's termination shows that the termination process was a
mere simulation the required notices were given, a hearing was even scheduled and held, but
respondent was not really given a real opportunity to defend himself; and it seems that petitioners
had already decided to dismiss respondent from service, even before the first notice had been given.

Anent the written notice of charges and hearing, it is plain to see that there was merely a general
description of the claimed offenses of respondent. The hearing was immediately set in the afternoon
of February 23, 1999 the day respondent received the first notice. Therefore, he was not given any
opportunity at all to consult a union official or lawyer, and, worse, to prepare for his defense.

Regarding the February 23, 1999 afternoon hearing, it can be inferred that respondent, without any
lawyer or friend to counsel him, was not given any chance at all to adduce evidence in his defense.
At most, he was asked if he did not agree to render overtime work on February 22, 1999 and if he
was late for work for 197 days. He was never given any real opportunity to justify his inability to
perform work on those days. This is the only explanation why petitioners assert that
respondent admitted all the charges.

In the February 24, 1999 notice of dismissal, petitioners simply justified respondent's dismissal by
citing his admission of the offenses charged. It did not specify the details surrounding the offenses
and the specific company rule or Labor Code provision upon which the dismissal was grounded.

In view of the infirmities in the proceedings, we conclude that termination of respondent was
railroaded in serious breach of his right to due process. And as a consequence of the violation of his
statutory right to due process and following Agabon, petitioners are liable jointly and solidarily to pay
nominal damages to the respondent in the amount of PhP 30,000.19

WHEREFORE, premises considered, the November 14, 2001 CA Decision in CA-G.R. SP No. 62959,
the April 28, 2000 Decision of the NLRC in NLRC NCR CA No. 022433-00, and the October 29, 1999
Decision of the Labor Arbiter in NLRC Case No. RAB IV-2-10806-99-C are
hereby REVERSED and SET ASIDE. The Court declares respondent's dismissal from
employment VALID and LEGAL. Petitioners are, however, ordered jointly and solidarily to pay
respondent nominal damages in the amount of PhP 30,000 for violation of respondent's right to due
process.

Labor II – 1
 3.) G.R. No. 125606 October 7, 1998

SAN MIGUEL CORPORATION, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION,

THIRD DIVISION, and FRANCISCO DE GUZMAN, JR., Respondents.

QUISUMBING, J.:

Before us is the petition for  certiorari under Rule 65 of the Revised Rules of Court seeking on set
aside the April 18, 1996 Decision 1 and the May 30, 1996 Resolution 2 of public respondent National
Labor Relations Commission 3 in NLRC CA No. 009490-95. Said decision reversed the JUne 30, 1995
judgment 4 of the labor Artiber 5 in NLRC-NCR Case No. 00-08-05954-94, and oredered the
reinstatement of private respondent as follows:

WHEREFORE, premises considered, the assiled decision is hereby VACATED and SET ASIDE. A new
one is hereby entered ordering herein respondent San Miguel Corporation to reinstate complainant to
his former position with full backwages from the time he was dismissed from work until he is actually
reinstated without loss of seniority rights and ther benefits, less earning elsewhere, if any. 6

The facts on record show that in November 1990, private respondent was hired by petitioner as
helper/bricklayer for a specific project, the repair and upgrading of furnace C at its Manila Glass
Plant. His contract of employment provided that said temporary employment was for a specific
period of approximately four (4) months.

On April 30, 1991, private respondent was able to complete the repair and upgrading of furnace C.
Thus, his services were terminated on that same day as there was no more work to be done. His
employment contract also ended that day.

On May 10, 1991, private respondent was again hired for a specific job or undertaking, which
involved the draining/cooling down of fuenace F and the emergency repair of furnace E. This project
was for a specific period of approximately three (3) months.

After the complesion of this task, namely the draining/cooling down of furnace F and the emergency
repair of furnace E, at the end of July 1991, private respondent's services were terminated.

On August 1, 1991, complainant saw his name in a Memorandum posted at the Company's Bulletin
Board as among those who were considered dismissed.

On August 12, 1994, or after the lapse of more than three (3) years from the completion of the last
undertaking for which private respondent was hired, private respondent filed a complaint for illegal
dismissal against petitioner, docketed as NLRC NCR Case No. 08-05954-94. 7

Both parties submitted their respective position papers, reply and rejoinder to labor Arbiter Felipe
Garduque II. On JUne 30, 1995, he rendered the decision dismissing said complaint for lack of merit.
In his ruling Labor Arbiter Garduque sustained petitioner's argument that private respondent was a
project employee. The position of a helper does not fall within the classification of regular employees.
Hence, complainant never attained regular employment status. Moreover, his silence for more than
three (3) years without any reasonable explanation tended to weken his claim. 8

Not satisfied with the decision, private respondent interposed his appeal with public respondent NLRC
on August 8, 1995 Petitioner filed its opposition thereto on August 29, 1995.

Labor II – 1
On April 18, 1996, public respondent NLRC, promulgated its assailed decision, reversing Labor Arbiter
Garduque's decision. In its ruling, public respondent made the following findings:

Respondent scheme of subsequently re-hiring complainant after only ten (10) days from the last day
of the expiration of his contract of employment for a specific period, and giving him again another
contract of employment for another specific period cannot be countenanced. This is one way of doing
violence to the employee's constitutional right to security of tenure under which even employees
under probationary status are amply protected.

Under the circumstances obtaining in the instant case we find that herein complainant was indeed
illegally dismissed. Respondent failed to adduce substantial evidence to prove that Francisco de
Guzman, Jr. was dismissed for a just or authorized cause and after due process. The only reason
they advance is that his contract of employment which is for a specific period had already expired.
We, however, find this scheme, as discussed earlier, no in accordance with law. 9

Petitioner then moved for the reconsideration of said decision. This was however denied by public
respondent on May 30, 1996 as it found no cogent reason, or patent or palpable error, that would
warrant the disturbance of the decision sought to be reconsidered.

Hence, this petition, based on the following grounds:

1. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN FAILING TO RULE THAT PRIVATE
RESPONDENT IS A PROJECT OR A FIXED PERIOD EMPLOYEE.

2. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN RULING THAT PETITIONER VIOLATED
PRIVATE RESPONDENT'S RIGHT TO SECURITY OF TENURE AND THAT PRIVATE RESPONDENT WAS
ILLEGALLY DISMISSED.

3. RESPONDENT NLRC GRAVELY ABUSED ITS DISCRETION IN RULING THAT LACHES OR SILENCE OR
INACTION FOR AN UNREASONABLE LENGTH OF TIME DID NOT BAR PRIVATE RESPONDENT'S CLAIM.

Given these ground, this petition may be resolved once the following issues are clarified: (a) What is
tile nature of the employment of private respondent, that of a project employee or a regular
employee? and (b) Was he terminated legally or dismissed illegally?

As a general rule the factual findings and conclusions drawn by the National Labor Relations
Commission are accorded not only great weight and respect, but even clothed with finality and
deemed binding on the Court, as long as they are supported by substantial evidence. However, when
such findings and those of the Labor Arbiter are in conflict, it behooves this Court to scrutinize the
records of the case, particularly the evidence presented, to arrive at a correct decision. 10

Art. 280 of the Labor Code defines regular, project and casual employment as follows:

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

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

Provided, That, any employee who has rendered at least one year of service, whether such service is

Labor II – 1
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such actually exists.

The above mentioned provision reinforces the Constitutional mandate to protect the interest of labor
as it sets the legal framework for ascertaining one's nature of employment, and distinguishing
different kinds of employees. Its language manifests the intent to safeguard the tenurial interest of
worker who may be denied the enjoyment of the rights and benefits due to an employee, regardless
of the nature of his employment, by virtue of lopsided agreements which the economically powerful
employer who can maneuver to keep an employee on a casual or contractual status for as long as it
is convenient to the employer.

Thus, under Article 280 of the Labor Code, an employment is deemed regular when the activities
performed by the employee are usually necessary or desirable in the usual business or trade of the
employer even if the parties enter into an agreement stating otherwise. But considered not regular
under said Article (1) the so-called "project employment" the termination of which is more or less
determinable at the time of employment, such as those connected, which by its nature is only for one
season of the year and the employment is limited for the duration of that season, such as the
Christmas holiday season. Nevertheless, an exception to this exception is made: any employee who
has rendered at least one (1) year of service, whether continuous or intermitent, with respect to the
activity he performed and while such activity actually exists, must be deemed regular.

Following Article 280, whether one is employed as a project employee or not would depend on
whether he was hired to carry out a "specific project or undertaking", the duration and scope of
which were specified at the time his services were engaged for that particular project. 11 Another
factor that may be undertaken by the employee in relation to the usual trade or business of the
employer, if without specifying the duration and scope, the work to be undertaken is
usually necessary or desirable in the usual business or trade of the employer, then it is regular
employment and not just "project" must less "casual" employment.

Thus, the nature of one's employment does not depend on the will or word of the employer. Nor on
the procedure of hiring and the manner of designating the employee, but on the nature of the
activities to be performed by the employee, considering the employer's nature of business 12 and the
duration and scope of the work to be done.

In ALU-TUCP vs NLRC, 13 this Court discussed two types of projects:

In the realm of business and industry, we note that project could refer to one or the other of at least
two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or
undertaking that is within the regular or usual business of the employer company, but which is
distinct at separate, and identifiable as such, from the other undertakings of the company. Such job
or undertaking begins and ends at determined or determinable times. . . .

The term project could also refer to, secondly, a particular job or undertaking that is not within the
regular business of the corporation. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking
also begins and ends at determined or determinable times . . . (Underscoring supplied)

Public respondent NLRC's findings that herein private respondent is a regular employee is erraneous
as the latter's employment clearly falls within the definition of "project employees" under paragraph
1 of Article 280 of the Labor Code and such is a typical example of the second kind of project
employment in the ALU TUCP case discussed above

Note that the plant where private respondent was employed for only even months is engaged in the
manufacturer of glass, an integral component of the packaging and manufacturing business of
Labor II – 1
petitioner. The process of manufacturing glass requires a furnace, which has a limited operating life.
Petitioner resorted to hiring project or fixed term employees in having said furnaces repaired since
said activity is not regularly performed. Said furnaces are to be repaired or overhauled only in case of
need and after being used continuously for a varying period of five (5) to ten (10) years.

In 1990, one of the furnaces of petitioner required repair and upgrading. This was a undertaking
distinct and separate from petitioner's business of manufacturing glass. For this purpose, petitioner
must hire workers to undertake the said repair and upgrading. Private respondent was, thus, hired by
petitioner on November 28, 1990 on a "temporary status for a specific job" for a determined period
of approximately four months

Upon completion of the undertaking, or on April 30, 1991, private respondent's services were
terminated. A few days, thereafter, two of petitioner's furnaces required "draining/coolong down" and
"emergency repair". Private respondent was again hired on May 10, 1991 to help in the new
undertaking, which would take approximately three (3) months to accomplish. Upon completion of
the second undertaking, private respondent's services were likewise terminated. 14 He was not hired a
third time, and his two engagements taken together did not total one full year in order to qualify him
as an exception to the exception falling under the cited proviso in the second paragraph of Art. 280
of the Labor Code.

Clearly, private respondent was hired for a specific project that was not within the regular business of
the corporation. For petitioner is not engaged in the business of repairing furnaces. Although the
activity was necessary to enable petitioner to continue manufacturing glass, the necessity therefor
arose only when a particular furnace reached the end of its life or operating cycle. Or, as on the
second undertaking, when a particular furnace required an emergency repair. In other words, the
undertakings where private respondent was hired primarily as helper/bricklayer have specified goals
and purpose which are fulfilled once the designated work was completed. Moreover, such
undertakings were also identifiably separate and distinct from the usual, ordinary or regular business
operations of petitioner, which is glass manufacturing. These undertakings, the duration and scope of
which had been determined and made known to private respondent at the time of his employment
clearly indicated the nature of his employment as a project employee. Thus, his services were
terminated legally after the completion of the project. 15

Public respondent NLRC's decision, if upheld, would amount to negating the distinction made in
Article 280 of the Labor Code. It would shunt aside the rule that since a project employee's work
defends on the availability of a project, necessarily, the duration of his employment is coterminous
with the project to which he is assigned. 16 It would become a burden for an employer to retain an
employee and pay him his corresponding wages it there was no project for him to work on. Well to
remember is the language of the Court in the case of Mamansag vs. NLRC: 17

While the Constitution is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every dispute will be automatically decided in favor of labor.
Management has also rights, which, as such, are entitled to respect and enforcement in the interest
of fair play. Although the Supreme Court has inclined more often than not toward the worker and has
upheld has cause in his conflicts with the employer, such favoritism has no blinded the Court to the
rule that justice is in avery case for the deserving, to be dispensed in the light of the established
facts and the applicable law and doctrine.

Considering that private respondent was a project employee whose employment, the nature of which
he was fully informed, related to a specific project, work or undertaking, we find that the Labor
Arbiter correctly ruled that said employment legally ended upon completion of said project. Hence
the termination of his employment was not tantamount to an illegal dismissal; and it was a grave
abuse of discretion on public respondent's part to order his reinstatement by petitioner.

Labor II – 1
WHEREFORE the instant petition is hereby GRANTED. The decision of respondent NLRC is hereby
REVERSED, and the judgment of the Labor Arbiter REINSTATED.

Labor II – 1
4.) G.R. No. 168215               June 9, 2009

LBC EXPRESS - METRO MANILA, INC. and LORENZO A. NIÑO, Petitioners,

vs.
JAMES MATEO, Respondent.

DECISION

CORONA, J.:

Respondent James Mateo, designated as a customer associate, was a regular employee of petitioner LBC Express
– Metro Manila, Inc. (LBC). His job was to deliver and pick-up packages to and from LBC and its customers. For this
purpose, Mateo was assigned the use of a Kawasaki motorcycle.1

On April 30, 2001 at about 6:10 p.m., Mateo arrived at LBC’s Escolta office, along Burke Street, to drop off
packages coming from various LBC airposts. He parked his motorcycle directly in front of the LBC office, switched
off the engine and took the key with him. However, he did not lock the steering wheel because he allegedly was
primarily concerned with the packages, including a huge sum of money that needed to be immediately secured
inside the LBC office. He returned promptly within three to five minutes but the motorcycle was gone. He
immediately reported the loss to his superiors at LBC and to the nearest police station.

LBC, through its vice-president petitioner, Lorenzo A. Niño, directed Mateo to appear in his office to explain his side
and for formal investigation.2 As directed, Mateo appeared and presented his side. After investigation, he received a
notice of termination from LBC dated May 30, 2001.3 He was barred from reporting for work.

Mateo thereafter filed a complaint for illegal dismissal, payment of backwages and reinstatement with damages.
After the parties submitted their respective position papers, the labor arbiter found Mateo’s dismissal to be lawful on
the ground that he was grossly negligent.4

Mateo appealed to the National Labor Relations Commission which, however, affirmed the labor arbiter’s decision.5

In resolving Mateo’s petition for certiorari, the Court of Appeals (CA) ruled that Mateo was illegally
dismissed.6 Furthermore, due process was not observed in terminating Mateo’s employment with LBC. The motion
for reconsideration was denied.

LBC and Niño now seek a reversal of the CA decision. They contend that Mateo was grossly negligent in the
performance of his duties and that habituality may be dispensed with, specially if the grossly negligent act
resulted in substantial damage to the company.

We agree.

The services of a regular employee may be terminated only for just or authorized causes, including gross and
habitual negligence under Article 282, paragraph (b) of the Labor Code.

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.7

Mateo was undisputedly negligent when he left the motorcycle along Burke Street in Escolta, Manila without
locking it despite clear, specific instructions to do so. His argument that he stayed inside the LBC office for only
three to five minutes was of no moment. On the contrary, it only proved that he did not exercise even the slightest
degree of care during that very short time. Mateo deliberately did not heed the employer’s very important
precautionary measure to ensure the safety of company property. Regardless of the reasons advanced, the
exact evil sought to be prevented by LBC (in repeatedly directing its customer associates to lock their motorcycles)
occurred, resulting in a substantial loss to LBC.
Labor II – 1
Although Mateo’s infraction was not habitual, we must take into account the substantial amount lost.8 In
this case, LBC lost a motorcycle with a book value of ₱46,000 which by any means could not be considered
a trivial amount. Mateo was entrusted with a great responsibility to take care of and protect company
property and his gross negligence should not allow him to walk away from that incident as if nothing
happened and, worse, to be rewarded with backwages to boot.

An employer cannot legally be compelled to continue with the employment of a person admittedly guilty of gross
negligence in the performance of his duties.9 This holds true specially if the employee’s continued tenure is patently
inimical to the employer’s interest.  What happened was not a simple case of oversight and could not be attributed
1avvphi1

to a simple lapse of judgment. No amount of good intent, or previous conscientious performance of duty, can
assuage the damage Mateo caused LBC when he failed to exercise the requisite degree of diligence required of him
under the circumstances. 1awphi1

LBC and Niño likewise assail the CA’s finding that procedural due process was not observed in effecting Mateo’s
dismissal. Specifically, the CA held that the first written notice (for Mateo’s investigation) allegedly did not specify the
grounds for termination required by the implementing rules of the Labor Code. Mateo was allegedly not properly
apprised of the grounds for his investigation. We disagree.

The memorandum directing Mateo to be present for investigation clearly provided the reasons or grounds for
Mateo’s investigation. As stated there, the grounds were the "alleged carnapping of the motorcycle and the alleged
pilferage of a package." Nothing could be clearer. What the law merely requires is that the employee be informed of
the particular acts or omissions for which his dismissal is sought.10 The memorandum did just that. Mateo was
thereafter given the opportunity to explain his side and was handed the requisite second notice (of termination).
Procedural due process was therefore complied with.

The law protecting the rights of the employee authorizes neither oppression nor self-destruction of the
employer.11 All told, Mateo’s dismissal was for just cause and was validly carried out.

WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals dated February 18, 2005 and
resolution dated May 23, 2005 in CA-G.R. SP No. 86034 are REVERSED and SET ASIDE. The complaint for illegal
dismissal is hereby DISMISSED.

Labor II – 1
5.) G.R. Nos. 142732-33             December 4, 2007

MARILOU S. GENUINO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CITIBANK, N.A., WILLIAM FERGUSON, and AZIZ
RAJKOTWALA, respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. Nos. 142753-54

CITIBANK, N.A., WILLIAM FERGUSON, and AZIZ RAJKOTWALA, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MARILOU GENUINO, respondents.

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 seeks to set aside the September 30, 1999 Decision1 and
March 31, 2000 Resolution2 of the Court of Appeals (CA) in the consolidated cases docketed as CA-G.R. SP Nos.
51532 and 51533. The appellate court dismissed the parties' petitions involving the National Labor Relations
Commission's (NLRC's) Decision3 and Resolution,4 which held that Marilou S. Genuino was validly dismissed by
Citibank, N.A. (Citibank). The NLRC likewise ordered the payment of salaries from the time that Genuino was
reinstated in the payroll to the date of the NLRC decision. Upon reconsideration, however, the CA modified its
decision and held that Citibank failed to observe due process in CA-G.R. SP No. 51532; hence, Citibank should
indemnify Genuino in the amount of PhP 5,000. Both parties are now before this Court assailing portions of the CA's
rulings. In G.R. Nos. 142732-33, Genuino assails the CA's finding that her dismissal was valid. In G.R. Nos.
142753-54, Citibank questions the CA's finding that Citibank violated Genuino's right to procedural due process and
that Genuino has a right to salaries.

Citibank is an American banking corporation duly licensed to do business in the Philippines. William Ferguson was
the Manila Country Corporate Officer and Business Head of the Global Finance Bank of Citibank while Aziz
Rajkotwala was the International Business Manager for the Global Consumer Bank of Citibank.5

Genuino was employed by Citibank sometime in January 1992 as Treasury Sales Division Head with the rank of
Assistant Vice-President. She received a monthly compensation of PhP 60,487.96, exclusive of benefits and
privileges.6

On August 23, 1993, Citibank sent Genuino a letter charging her with "knowledge and/or involvement" in
transactions "which were irregular or even fraudulent." In the same letter, Genuino was informed she was under
preventive suspension.7

Genuino wrote Citibank on September 13, 1993 and asked the bank the following:

a. Confront our client with the factual and legal basis of your charges, and afford her an opportunity to
explain;

b. Substantiate your charge of fraudulent transactions against our client; or if the same cannot be
substantiated;

c. Correct/repair/compensate the damage you have caused our client.8

Labor II – 1
On September 13, 1993, Citibank, through Victorino P. Vargas, its Country Senior Human Resources Officer, sent a
letter to Genuino, the relevant portions of which read:

As you are well aware, the bank served you a letter dated August 23, 1993 advising you that ongoing
investigations show that you are involved and/or know of irregular transactions which are at the very least in
conflict with the bank's interest, and, may even be fraudulent in nature.

These transactions are those involving Global Pacific and/or Citibank and the following bank clients, among
others:

1. Norma T. de Jesus

2. Carmen Intengan/Romeo Neri

3. Mario Mamon

4. Vienna Ochoa/IETI

5. William Samara

6. Roberto Estandarte

7. Rita Browner

8. Ma. Redencion Sumpaico

9. Cesar Bautista

10. Teddy Keng

11. NDC-Guthrie

12. Olivia Sy

In view of the foregoing, you are hereby directed to explain in writing three (3) days from your receipt hereof
why your employment should not be terminated in view of your involvement in these irregular transactions.
You are also directed to appear in an administrative investigation of the matter which is set on Tuesday,
Sept. 21, 1993 at 2:00 P.M. at the HR Conference Room, 6th Floor, Citibank Center. You may bring your
counsel if you so desire.9

Genuino's counsel replied through a letter dated September 17, 1993, demanding for a bill of particulars regarding
the charges against Genuino. Citibank's counsel replied on September 20, 1993, as follows:

1.2. [T]he bank has no intention of converting the administrative investigation of this case to a full blown trial.
What it is prepared to do is give your client, as required by law and Supreme Court decisions, an opportunity
to explain her side on the issue of whether she violated the conflict of interest rule—either in writing (which
could be in the form of a letter-reply to the September 13, 1993 letter to Citibank, N.A.) or in person, in the
administrative investigation which is set for tomorrow afternoon vis-à-vis the bank clients/parties mentioned
in the letter of Citibank, N.A.

xxxx

2.2. You will certainly not deny that we have already fully discussed with you what is meant by the conflict
with the bank's interest vis-à-vis the bank clients/parties named in the September 13, 1993 letter of Citibank
to Ms. Genuino. As we have repeatedly explained to you, what the bank meant by it is that your client and
Labor II – 1
 Mr. Dante Santos, using the facilities of their family corporations (Torrance and Global) appear to have
participated in the diversion of bank clients' funds from Citibank to, and investment thereof in, other
companies and that they made money in the process, in violation of the conflict of law rule. It is her side of
this issue that Citibank, N.A. is waiting to receive/hear from Ms. Genuino.10

Genuino did not appear in the administrative investigation held on September 21, 1993. Her lawyers wrote a letter to
Citibank's counsel asking "what bank clients' funds were diverted from the bank and invested in other companies,
the specific amounts involved, the manner by which and the date when such diversions were purportedly affected."
In reply, Citibank's counsel noted Genuino's failure to appear in the investigation and gave Genuino up to
September 23, 1993 to submit her written explanation. Genuino did not submit her written explanation.11

On September 27, 1993, Citibank informed Genuino of the result of their investigation. It found that Genuino with
Santos used "facilities of Genuino's family corporation, namely, Global Pacific, personally and actively participated in
the diversion of bank clients' funds to products of other companies that yielded interests higher than what Citibank
products offered, and that Genuino and Santos realized substantial financial gains, all in violation of existing
company policy and the Corporation Code, which for your information, carries a penal sanction."12

Genuino's employment was terminated by Citibank on grounds of (1) serious misconduct, (2) willful breach of the
trust reposed upon her by the bank, and (3) commission of a crime against the bank.13

On October 15, 1993, Genuino filed before the Labor Arbiter a Complaint14 against Citibank docketed as NLRC
Case No. 00-10-06450-93 for illegal suspension and illegal dismissal with damages and prayer for temporary
restraining order and/or writ of preliminary injunction. The Labor Arbiter rendered a Decision15 on May 2, 1994, the
dispositive portion of which reads:

WHEREFORE, finding the dismissal of the complainant Marilou S. Genuino to be without just cause and in
violation of her right to due process, respondent CITIBANK, N.A., and any and all persons acting on its
behalf or by or under their authority are hereby ordered to reinstate complainant immediately to her former
position as Treasury Sales Division Head or its equivalent without loss of seniority rights and other benefits,
with backwages from August 23, 1993 up to April 30, 1994 in the amount of P493,800.00 (P60,000 x 8.23
mos.) subject to adjustment until reinstated actually or in the payroll.

Respondents are likewise ordered to pay complainant the amount of 1.5 Million Pesos and P500,000.00 by
way of moral and exemplary damages plus 10% of the total monetary award as attorney's fees.16

Both parties appealed to the NLRC. The NLRC, in its September 3, 1994 Decision in NLRC-NCR Case No. 00-10-
06450-93 (CA No. 006947-94), reversed the Labor Arbiter's decision with the following modification:

WHEREFORE, Judgment is hereby rendered (1) SETTING ASIDE the appealed decision of the Labor
Arbiter; (2) DECLARING the dismissal of the complainant valid and legal on the ground of serious
misconduct and breach of trust and confidence and consequently DISMISSING the complaint a quo; but (3)
ORDERING the respondent bank to pay the salaries due to the complainant from the date it reinstated
complainant in the payroll (computed at P60,000.00 a month, as found by the Labor Arbiter) up to and until
the date of this decision.

SO ORDERED.17

The parties' motions for reconsideration were denied by the NLRC in a resolution dated October 28, 1994.18

The Ruling of the Court of Appeals

On December 6, 1994, Genuino filed a petition for certiorari docketed as G.R. No. 118023 with this Court. Citibank's
petition for certiorari, on the other hand, was docketed as G.R. No. 118667. In the January 27, 1999 Resolution, we
referred these petitions to the CA pursuant to our ruling in St. Martin Funeral Home v. NLRC.19

Labor II – 1
Genuino's petition before the CA was docketed as CA-G.R. SP No. 51532 while Citibank's petition was docketed as
CA-G.R. SP No. 51533. Genuino prayed for the reversal of the NLRC's decision insofar as it declared her dismissal
valid and legal. Meanwhile, Citibank questioned the NLRC's order to pay Genuino's salaries from the date of
reinstatement until the date of the NLRC's decision.

The CA promulgated its decision on September 30, 1999, denying due course to and dismissing both
petitions.20 Both parties filed motions for reconsideration and on March 31, 2000, the appellate court modified its
decision and held:

WHEREFORE, save for the MODIFICATION ordering Citibank, N.A. to pay Ms. Marilou S. Genuino five
thousand pesos (P5,000.00) as indemnity for non-observance of due process in CA-G.R. SP No. 51532, this
Court's 30 September 1999 decision is REITERATED and AFFIRMED in all other respects.

SO ORDERED.21

Hence, we have this petition.

The Issue

WHETHER OR NOT THE DISMISSAL OF GENUINO IS FOR A JUST CAUSE AND IN ACCORDANCE WITH DUE
PROCESS

In G.R. Nos. 142732-33, Genuino contends that Citibank failed to observe procedural due process in terminating
her employment. This failure is allegedly an indication that there were no valid grounds in dismissing her. In G.R.
Nos. 142753-54, Citibank questions the ruling that Genuino has a right to reinstatement under Article 223 of the
Labor Code. Citibank contends that the Labor Arbiter's finding is not supported by evidence; thus, the decision is
void. Since a void decision cannot give rise to any rights, Citibank opines that there can be no right to payroll
reinstatement.

The dismissal was for just cause but lacked due process

We affirm that Genuino was dismissed for just cause but without the observance of due process.

In a string of cases, 22 we have repeatedly said that the requirement of twin notices must be met. In the recent case
of King of Kings Transport, Inc. v. Mamac, we explained:

To clarify, the following should be considered in terminating the services of employees:

(1) The first written notice to be served on the employees should contain the specific causes or grounds
for termination against them, and a directive that the employees are given the opportunity to submit their
written explanation within a reasonable period. "Reasonable opportunity" under the Omnibus Rules means
every kind of assistance that management must accord to the employees to enable them to prepare
adequately for their defense. This should be construed as a period of at least five (5) calendar days from
receipt of the notice to give the employees an opportunity to study the accusation against them, consult a
union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as
basis for the charge against the employees. A general description of the charge will not suffice. Lastly, the
notice should specifically mention which company rules, if any, are violated and/or which among the grounds
under Art. 282 is being charged against the employees.

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

(3) After determining that termination of employment is justified, the employers shall serve the employees
a written notice of termination indicating that: (1) all circumstances involving the charge against the
employees have been considered; and (2) grounds have been established to justify the severance of their
employment.23

The Labor Arbiter found that Citibank failed to adequately notify Genuino of the charges against her. On the
contrary, the NLRC held that "the function of a 'notice to explain' is only to state the basic facts of the employer's
charges, which x x x the letters of September 13 and 17, 1993 in question have fully served."24

We agree with the CA that the dismissal was valid and legal, and with its modification of the NLRC ruling that PhP
5,000 is due Genuino for failure of Citibank to observe due process.

The Implementing Rules and Regulations of the Labor Code provide that any employer seeking to dismiss a worker
shall furnish the latter a written notice stating the particular acts or omissions constituting the grounds for
dismissal.25 The purpose of this notice is to sufficiently apprise the employee of the acts complained of and enable
him/her to prepare his/her defense.

In this case, the letters dated August 23, September 13 and 20, 1993 sent by Citibank did not identify the particular
acts or omissions allegedly committed by Genuino. The August 23, 1993 letter charged Genuino with having
"some knowledge and/or involvement" in some transactions "which have the appearance of being irregular at the
least and may even be fraudulent." The September 13, 1993 letter, on the other hand, mentioned "irregular
transactions" involving Global Pacific and/or Citibank and 12 bank clients. Lastly, the September 20, 1993 letter
stated that Genuino and "Mr. Dante Santos, using the facilities of their family corporations (Torrance and Global)
appear to have participated in the diversion of bank clients' funds from Citibank to, and investment thereof in, other
companies and that they made money in the process, in violation of the conflict of law rule [sic]." The extent of
Genuino's alleged knowledge and participation in the diversion of bank's clients' funds, manner of diversion, and
amounts involved; the acts attributed to Genuino that conflicted with the bank's interests; and the circumstances
surrounding the alleged irregular transactions, were not specified in the notices/letters.

While the bank gave Genuino an opportunity to deny the truth of the allegations in writing and participate in the
administrative investigation, the fact remains that the charges were too general to enable Genuino to intelligently
and adequately prepare her defense.

The two-notice requirement of the Labor Code is an essential part of due process. The first notice informing the
employee of the charges should neither be pro-forma nor vague. It should set out clearly what the employee is being
held liable for. The employee should be afforded ample opportunity to be heard and not mere opportunity. As
explained in King of Kings Transport, Inc., ample opportunity to be heard is especially accorded the employees
sought to be dismissed after they are specifically informed of the charges in order to give them an opportunity to
refute such accusations leveled against them. Since the notice of charges given to Genuino is inadequate, the
dismissal could not be in accordance with due process.

While we hold that Citibank failed to observe procedural due process, we nevertheless find Genuino's dismissal
justified.

Citibank maintains that Genuino was aware of the bank's Corporate Policy Manual specifically Chapter 3 on
"Principles and Policies" with regard to avoiding conflicts of interest. She had even submitted a Conflict of Interest
Survey to Citibank. In that survey, she denied any knowledge of engaging in transactions in conflict with Citibank's
interests. Citibank, for its part, submitted evidence showing 99% ownership of Global stocks by Genuino and
Santos. In July 1993, Citibank discovered that Genuino and Santos were instrumental in the withdrawal by bank
depositors of PhP 120 million of investments in Citibank. This amount was subsequently invested in another foreign
bank, Internationale Nederlanden Bank, N.V., under the control of Global and Torrance, another corporation
controlled by Genuino and Santos. 26 Citibank also filed two criminal complaints against Genuino and Santos for
violations of the conflict of interest rule provided in Sec. 31 in relation to Sec. 14427 of the Corporation Code.28

Labor II – 1
We note also that during the proceedings before the Labor Arbiter, Citibank presented the following affidavits, with
supporting documentary evidence against Genuino:

1) Vic Lim, an officer of Citibank who investigated the anomalies of Genuino and Santos, concluded that
Genuino and Santos realized substantial financial gains out of the transfer of monies as supported by the
following documents:

1) [S]ome of the Term Investment Applications (TIA), Applications for Money Transfer, all filled up in the
handwriting of Ms. Marilou Genuino. These documents cover/show the transfer of the monies of the Citibank
clients from their money placements/deposits with Citibank, N.A. to Global and/or Torrance.

2) [S]ome of the checks that were drawn by Global and Torrance against their Citibank accounts in favor of
the other companies by which Global and Torrance transferred the monies of the bank clients to the other
companies.

3) [S]ome of the checks drawn by the other companies in favor of Global or Torrance by which the other
companies remitted back to Global and/or Torrance the monies of the bank clients concerned.

4) [S]ome of the checks drawn by Global and Torrance against their Citibank accounts in favor of Mr. Dante
Santos and Ms. Marilou Genuino, covering the shares of the latter in the spreads or margins Global and
Torrance had derived from the investments of the monies of the Citibank clients in the other companies.

5) [S]ome of the checks drawn by Torrance and Global in favor of Citibank clients by which Global and
Torrance remitted back to said bank clients their principal investments (or portions thereof) and the rates of
interests realized from their investment placed with the other companies less the spreads made by Global
and/or Torrance, Mr. Dante L. Santos and Ms. Marilou Genuino.29

In Lim's Reply-Affidavit with attached supporting documents, he stated that out of the competing money placement
activities, Genuino and Santos derived financial gains amounting to PhP 2,027,098.08 and PhP 2,134,863.80,
respectively.30

2) Marilyn Bautista, a Treasury Sales Specialist in the Treasury Department of the Global Consumer Bank of
Citibank and whose superiors were Genuino and Santos, stated that:

Based on documents that have subsequently come to my knowledge, I realized that the two (Genuino and
Dante L. Santos), with the active cooperation of Redencion Sumpaico (the Accountant of Global) had …
brokered for their own benefits and/or of Global the sale of the financial products of Citibank called
"Mortgage Backed Securities" or MBS and in the process made money at the expense of the (Citibank)
investors and the bank.31

3) Patrick Cheng attested to other transactions from which Genuino, Santos, and Global brokered the Mortgage
Backed Securities (MBS), namely: ICC/Nemesio and Olivia Sy transaction, San Miguel Corporation/ICC,
CIPI/Asiatrust, FAPE, PERAA and Union Bank, and NDC-Guthrie transactions.32

In her defense, Genuino asserts that Citibank has no evidence of any wrongful act or omission imputable to her.
According to her, she did not try to conceal from the bank her participation in Global and she even disclosed the
information when Global designated Citibank as its depositary. She avers there was no conflict of interest because
Global was not engaged in Citibank's accepting deposits and granting loans, nor in money placement activities that
compete with Citibank's activities; and neither does Citibank invest in the outlets used by Global. She claims that the
controversy between Santos and Global had already been amicably resolved in a Compromise Agreement between
the two parties.33

Genuino further asserts that the letter of termination did not indicate what existing company policy had been
violated, and what acts constituted serious misconduct or willful breach of the trust reposed by the bank. She claims
that Lim's testimony that the checks issued by Global in her name were profits was malicious, hearsay, and lacked
factual basis. She also posits that as to the withdrawals of clients, she could not possibly dictate on the depositors.
Labor II – 1
She pointed out that the depositors even sent Citibank a letter dated August 25, 1993 informing the bank that the
withdrawals were made upon their express instructions. Genuino avers the bank's loss of confidence should have to
be proven by substantial evidence, setting out the facts upon which loss of confidence in the employee may be
made to rest.34

Contrary to the Labor Arbiter's finding, the NLRC found the following facts supported by the records:

a) Respondent bank has a conflict of interest rule, embodied in Chapter 3 of its Corporate Policy Manual,
prohibiting the officers of the bank from engaging in business activities, situations or circumstances that are
in conflict with the interest of the bank.

b) Complainant was familiar with said conflict of interest rule of the bank and of her duty to disclose to the
bank in writing any personal circumstances which conflicts or appears to be in conflict with Citibank's
interest.

c) Complainant is a substantial stockholder of Global Pacific, but she did not disclose fact to the bank.

d) Global Pacific is engaged in money placement business like Citibank, N.A.; that in carrying out its said
money placement business, it used funds belonging to Citibank clients which were withdrawn from Citibank
with participation of complainant and Dante L. Santos. In one transaction of this nature, P120,000,000.00
belonging to Citibank clients was withdrawn from Citibank, N.A. and placed in another foreign bank, under
the control of Global Pacific. Said big investment money was returned to Citibank, N.A. only when Citibank,
N.A. filed an injunction suit.

e) Global Pacific also engaged in the brokering of the ABS or MBS, another financial product of Citibank. It
was the duty of complainant Genuino and Dante L. Santos to sell said product on behalf of Citibank, N.A.
and for Citibank N.A.'s benefit. In the brokering of the ABS or MBS, Global Pacific made substantial profits
which otherwise would have gone to Citibank, N.A. if only they brokered the ABS or MBS for and on behalf
of Citibank, N.A.

Art. 282(c) of the Labor Code provides that an employer may terminate an employment for fraud or willful breach by
the employee of the trust reposed in him/her by his/her employer or duly authorized representative. In order to
constitute as just cause for dismissal, loss of confidence should relate to acts inimical to the interests of the
employer.35 Also, the act complained of should have arisen from the performance of the employee's duties.36 For
loss of trust and confidence to be a valid ground for an employee's dismissal, it must be substantial and not
arbitrary, and must be founded on clearly established facts sufficient to warrant the employee's separation from
work.37 We also held that:

[L]oss of confidence is a valid ground for dismissing an employee and proof beyond reasonable doubt of the
employee's misconduct is not required. It is sufficient if there is some basis for such loss of confidence or if
the employer has reasonable ground to believe or to entertain the moral conviction that the employee
concerned is responsible for the misconduct and that the nature of his participation therein rendered him
unworthy of the trust and confidence demanded by his position.38

As Assistant Vice-President of Citibank's Treasury Department, Genuino was tasked to solicit investments,
and peso and dollar deposits for, and keep them in Citibank; and to sell and/or push for the sale of
Citibank's financial products, such as the MBS, for the account and benefit of Citibank. 39 She held a position
of trust and confidence. There is no way she could deny any knowledge of the bank's policies nor her
understanding of these policies as reflected in the survey done by the bank. She could not likewise feign ignorance
of the businesses of Citibank, and of Global and Torrance. Assuming that Citibank did not engage in the same
securities dealt with by Global and Torrance; nevertheless, it is to the interests of Citibank to retain its clients and
continue investing in Citibank. Curiously, Genuino did not even dissuade the depositors from withdrawing
their monies from Citibank, and was even instrumental in the transfers of monies from Citibank to a
competing bank through Global and Torrance, the corporations under Genuino's control.

Labor II – 1
All the pieces of evidence compel us to conclude that Genuino did not have her employer's interest. The letter of the
bank's clients which attested that the withdrawals from Citibank were made upon their instructions is of no import. It
did not explain why they preferred to invest in Global and Torrance, nor did it mention that Genuino tried to dissuade
them from withdrawing their deposits. Genuino herself admitted her relationship with some of the depositors in her
affidavit, to wit:

6. Contrary to the allegations of Mr. Lim in par. 6.1 up to 8.1 concerning the alleged scheme employed in the
questioned transactions, insinuating an "in" and "out" movement of funds of the seven (7) depositors, the
truth is that after said "depositors" instructed/authorized us to effect the withdrawal of their
respective monies from Citibank to attain the common goal of higher yields utilizing Global as the
vehicle for bulk purchases of securities or papers not dealt with/offered by Citibank, said pooled
investment remained with Global, and were managed through Global for over a year until the controversy
arose;

10. The seven (7) "depositors" mentioned in Mr. Lim's Affidavits are the long-time friends of affiant
Genuino who had formed a loosely constituted investment group for purposes of realizing higher yields
derivable from pooled investments, and as the advisor of the group she had in effect chosen Citibank as the
initial repository of their respective monies prior to the implementation of plans for pooled investments under
Global. Hence, she had known and dealt with said "depositors" before they became substantial depositors of
Citibank. She did not come across them because of Citibank.40 (Emphasis supplied.)

All told, Citibank had valid grounds to dismiss Genuino on ground of loss of confidence.

In view of Citibank's failure to observe due process, however, nominal damages are in order but the amount is
hereby raised to PhP 30,000 pursuant to Agabon v. NLRC. The NLRC's order for payroll reinstatement is set aside.

In Agabon, we explained:

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. 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.41

Thus, the award of PhP 5,000 to Genuino as indemnity for non-observance of due process under the CA's March
31, 2000 Resolution in CA-G.R. SP No. 51532 is increased to PhP 30,000.

Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank "to pay the salaries due to the
complainant from the date it reinstated complainant in the payroll (computed at P60,000.00 a month, as found by
the Labor Arbiter) up to and until the date of this decision," the Court hereby cancels said award in view of its finding
that the dismissal of Genuino is for a legal and valid ground.

Ordinarily, the employer is required to reinstate the employee during the pendency of the appeal pursuant to Art.
223, paragraph 3 of the Labor Code, which states:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee
shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal
or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the
employer shall not stay the execution for reinstatement provided herein.

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries
s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the

Labor II – 1
dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining
agreement provisions, and company practices.42 However, if the employee was reinstated to work during the
pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered
without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based
on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3,
1994 NLRC Decision.

WHEREFORE, the petitions of Genuino in G.R. Nos. 142732-33 are DENIED for lack of merit. The petitions of
Citibank in G.R. Nos. 142753-54 are GRANTED. The September 30, 1999 Decision and March 31, 2000 Resolution
in CA-G.R. SP Nos. 51532 and 51533 are AFFIRMED with MODIFICATION that Genuino is entitled to PhP 30,000
as indemnity for non-observance of due process. Item (3) in the dispositive portion of the September 3, 1994
Decision of the NLRC in NLRC-NCR Case No. 00-10-06450-93 (CA No. 006947-94) is DELETED and SET
ASIDE, and said NLRC decision is MODIFIED as follows:

WHEREFORE, Judgment is hereby rendered (1) SETTING ASIDE the appealed decision of the Labor
Arbiter; (2) DECLARING the dismissal of the complainant valid and legal on the ground of serious
misconduct and breach of trust and confidence and consequently DISMISSING the complaint a quo; but
(3) ORDERING the respondent bank to pay the complainant nominal damages in the amount of PhP
30,000.

Labor II – 1
 6.) [G.R. NO. 173151 : March 28, 2008]

EDUARDO BUGHAW, JR., Petitioner, v. TREASURE ISLAND INDUSTRIAL

CORPORATION, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari  under Rule 45 of the Revised Rules of
Court, filed by petitioner Eduardo Bughaw, Jr., seeking to reverse and set aside the Decision,1 dated
14 June 2005 and the Resolution,2 dated 8 May 2006 of the Court of Appeals in CA-G.R. SP No.
85498. The appellate court reversed the Decision dated 28 August 2003 and Resolution dated 27
February 2004 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000231-02
that found the petitioner to be illegally dismissed from employment by respondent Treasure Island
Industrial Corporation. The dispositive portion of the assailed appellate court's Decision thus reads:

WHEREFORE, discussion considered, the decision dated August 28, 2003 of the National Labor
Relations Commission, Fourth Division, Cebu City, in NLRC Case No. V-000231-02 (RAB VII-06-1171-
01), is hereby VACATED and SET ASIDE en toto.

The award of money claims to [herein petitioner] is NULLIFIED and RECALLED.3

The factual and procedural antecedents of the instant Petition are as follows:

Sometime in March 1986, petitioner was employed as production worker by respondent. Respondent
was receiving information that many of its employees were using prohibited drugs during working
hours and within the company premises.4

On 5 June 2001, one of its employees, Erlito Loberanes (Loberanes) was caught in flagrante delicto
by the police officers while in possession of shabu. Loberanes was arrested and sent to jail. In the
course of police investigation, Loberanes admitted the commission of the crime. He implicated
petitioner in the crime by claiming that part of the money used for buying the illegal drugs was given
by the latter, and the illegal drugs purchased were for their consumption for the rest of the month.5

In view of Loberanes's statement, respondent, on 29 June 2001, served a Memo for Explanation6 to
petitioner requiring him to explain within 120 hours why no disciplinary action should be imposed
against him for his alleged involvement in illegal drug activities. Petitioner was further directed to
appear at the office of respondent's legal counsel on 16 June 2001 at 9:00 o'clock in the morning for
the hearing on the matter. For the meantime, petitioner was placed under preventive suspension for
the period of 30 days effective upon receipt of the Notice.

Notwithstanding said Memo, petitioner failed to appear before the respondent's legal counsel on the
scheduled hearing date and to explain his side on the matter.

On 19 July 2001, respondent, through legal counsel, sent a second letter7 to petitioner directing him
to attend another administrative hearing scheduled on 23 July 2001 at 11:00 o'clock in the morning
at said legal counsel's office but petitioner once again failed to show up.

Consequently, respondent, in a third letter8 dated 21 August 2001 addressed to petitioner,

terminated the latter's employment retroactive to 11 June 2001 for using illegal drugs within
company premises during working hours, and for refusal to attend the administrative hearing and
submit written explanation on the charges hurled against him.
Labor II – 1
On 20 July 2001, petitioner filed a complaint9 for illegal dismissal against respondent and its
President, Emmanuel Ong, before the Labor Arbiter. Petitioner alleged that he had been working for
the respondent for 15 years and he was very conscientious with his job. He was suspended for 30
days on 11 June 2001 based on the unfounded allegation of his co-worker that he used illegal drugs
within company premises. When petitioner reported back to work after the expiration of his
suspension, he was no longer allowed by respondent to enter the work premises and was told not to
report back to work.

On 8 January 2002, the Labor Arbiter rendered a Decision10 in favor of petitioner since the
respondent failed to present substantial evidence to establish the charge leveled against the
petitioner. Apart from Loberanes's statements on petitioner's alleged illegal drug use, no other
corroborating proof was offered by respondent to justify petitioner's dismissal. Further, respondent
failed to comply with due process when it immediately suspended petitioner and eventually dismissed
him from employment. Petitioner's immediate suspension was not justified since no evidence was
submitted by the respondent to establish that petitioner's continued employment pending
investigation poses a serious and imminent threat to respondent's life or property or to the life or
property of petitioner's co-workers. Finally, the Labor Arbiter observed that the notices of hearing
sent by respondent to petitioner were not duly received by the latter. The Labor Arbiter was not
swayed by respondent's explanation that the reason therefor was that petitioner refused to receive
said notices. The Labor Arbiter thus ruled:

WHEREFORE, premises considered, judgment is hereby rendered ordering [herein respondent] to pay
[herein petitioner] the following:

1. Separation pay P 74,100.00

2. Backwages P 27,550.00
3. Unpaid wages P 4,940.00
Total
P 106,590.00

The case against respondent Emmanuel Ong is dismissed for lack of merit.11

On appeal, the NLRC affirmed the Labor Arbiter's Decision in its Decision dated 28 August 2003. The
NLRC decreed that respondent failed to accord due process to petitioner when it dismissed him from
employment. The use of illegal drugs can be a valid ground for terminating employment only if it is
proven true. An accusation of illegal drug use, standing alone, without any proof or evidence
presented in support thereof, would just remain an accusation.12

The Motion for Reconsideration filed by respondent was denied by the NLRC in a Resolution13 dated
27 February 2004.

Resolving respondent's Petition for Certiorari, the Court of Appeals reversed the Decisions of the
Labor Arbiter and NLRC on the grounds of patent misappreciation of evidence and misapplication of
law. The appellate court found that petitioner was afforded the opportunity to explain and defend
himself from the accusations against him when respondents gave him notices of hearing, but
petitioner repeatedly ignored them, opting instead to file an illegal dismissal case against respondent
before the Labor Arbiter. The essence of due process in administrative proceedings is simply an
opportunity to explain one's side or to seek reconsideration of the action or ruling complained of. Due
process is not violated where one is given the opportunity to be heard but he chooses not to explain
his side.14

Similarly ill-fated was petitioner's Motion for Reconsideration which was denied by the Court of
Appeals in its Resolution15 dated 8 May 2006.

Labor II – 1
Hence, this instant Petition for Review on Certiorari16 under Rule 45 of the Revised Rules of Court
filed by petitioner impugning the foregoing Court of Appeals Decision and Resolution, and raising the
sole issue of:

WHETHER OR NOT PETITIONER WAS ILLEGALLY DISMISSED FROM EMPLOYMENT.

Time and again we reiterate the established rule that in the exercise of the Supreme Court's power of
review, the Court is not a trier of facts17 and does not routinely undertake the reexamination of the
evidence presented by the contending parties during the trial of the case considering that the
findings of facts 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 are binding
upon this Court,18 when supported by substantial evidence.19

The Labor Arbiter and the NLRC both ruled that petitioner was illegally dismissed from employment
and ordered the payment of his unpaid wages, backwages, and separation pay, while the Court of
Appeals found otherwise. The Labor Arbiter and the NLRC, on one hand, and the Court of Appeals, on
the other, arrived at divergent conclusions although they considered the very same evidences
submitted by the parties. It is, thus, incumbent upon us to determine whether there is substantial
evidence to support the finding of the Labor Arbiter and the NLRC that petitioner was illegally
dismissed. Substantial evidence is such amount of relevant evidence which a reasonable mind might
accept as adequate to support a conclusion, even if other equally reasonable minds might
conceivably opine otherwise.20

Under the Labor Code, the requirements for the lawful dismissal of an employee are two-fold, the
substantive and the procedural aspects. Not only must the dismissal be for a just21 or authorized
cause,22 the rudimentary requirements of due process - notice and hearing23 - must, likewise, be
observed before an employee may be dismissed. Without the concurrence of the two, the termination
would, in the eyes of the law, be illegal,24 for employment is a property right of which one cannot be
deprived of without due process.25

Hence, the two (2) facets of a valid termination of employment are: (a) the legality of the act of
dismissal, i.e., the dismissal must be under any of the just causes provided under Article 282 of the
Labor Code; and (b) the legality of the manner of dismissal, which means that there must be
observance of the requirements of due process, otherwise known as the two-notice rule.26

Article 282 of the Labor Code enumerates the just causes for terminating the services of an
employee:

ART. 282. Termination by employer. - An employer may terminate an employment for any of the
following causes:

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

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

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

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

(e) Other causes analogous to the foregoing.

Labor II – 1
The charge of drug abuse inside the company's premises and during working hours against
petitioner constitutes serious misconduct, which is one of the just causes for termination.
Misconduct is improper or wrong conduct. It is the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not merely an error in judgment. The misconduct to be serious
within the meaning of the Act must be of such a grave and aggravated character and not
merely trivial or unimportant. Such misconduct, however serious, must nevertheless, in
connection with the work of the employee, constitute just cause for his separation.27 This
Court took judicial notice of scientific findings that drug abuse can damage the mental faculties of the
user. It is beyond question therefore that any employee under the influence of drugs cannot possibly
continue doing his duties without posing a serious threat to the lives and property of his co-workers
and even his employer.

Loberanes's statements given to police during investigation is evidence which can be considered by
the respondent against the petitioner. Petitioner failed to controvert Loberanes' claim that he too was
using illegal drugs. Records reveal that respondent gave petitioner a first notice dated 11 June 2001,
giving him 120 hours within which to explain and defend himself from the charge against him and to
attend the administrative hearing scheduled on 16 June 2001. There is no dispute that petitioner
received said notice as evidenced by his signature appearing on the lower left portion of a copy
thereof together with the date and time of his receipt.28 He also admitted receipt of the first notice in
his Memorandum before this Court.29 Despite his receipt of the notice, however, petitioner did not
submit any written explanation on the charge against him, even after the lapse of the 120-day period
given him. Neither did petitioner appear in the scheduled administrative hearing to personally
present his side. Thus, the respondent cannot be faulted for considering only the evidence at hand,
which was Loberanes' statement, and conclude therefrom that there was just cause for petitioner's
termination.

We thus quote with approval the disquisition of the Court of Appeals:

The [NLRC] did not find substantial evidence in order to establish the charge leveled against [herein
petitioner] claiming that the statement of Loberanes is legally infirm as it was an admission made
under custodial investigation; and there has been no corroborating evidence. In administrative
proceedings, technical rules of procedure and evidence are not strictly applied and administrative due
process cannot be fully equated with due process in its strict judicial sense. Xxx It is sufficient that
[herein petitioner] was implicated in the use of illegal drugs and, more importantly, there is no
counter-statement from [herein petitioner] despite opportunities granted to him submit to an
investigation.30

It was by petitioner's own omission and inaction that he was not able to present evidence to refute
the charge against him.

Now we proceed to judge whether the manner of petitioner's dismissal was legal; stated otherwise,
whether petitioner was accorded procedural due process.

In Pastor Austria v. National Labor Relations Commission,31 the Court underscored the significance of
the two-notice rule in dismissing an employee:

The first notice, which may be considered as the proper charge, serves to apprise the employee of
the particular acts or omissions for which his dismissal is sought. The second notice on the other
hand seeks to inform the employee of the employer's decision to dismiss him. This decision,
however, must come only 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 a representative if he so desires. This is in consonance with the express provision of
the law on the protection to labor and the broader dictates of procedural due process. Non-

Labor II – 1
compliance therewith is fatal because these requirements are conditions sine qua non before
dismissal may be validly effected. (Emphases supplied.)

While there is no dispute that respondent fully complied with the first-notice requirement apprising
petitioner of the cause of his impending termination and giving him the opportunity to explain his
side, we find that it failed to satisfy the need for a second notice informing petitioner that he was
being dismissed from employment.

We cannot give credence to respondent's allegation that the petitioner refused to receive the third
letter dated 21 August 2001 which served as the notice of termination. There is nothing on record
that would indicate that respondent even attempted to serve or tender the notice of termination to
petitioner.  No affidavit of service was appended to the said notice attesting to the reason for
chanrobles virtual law library

failure of service upon its intended recipient. Neither was there any note to that effect by the server
written on the notice itself.

The law mandates that it is incumbent upon the employer to prove the validity of the termination of
employment.32 Failure to discharge this evidentiary burden would necessarily mean that the dismissal
was not justified and, therefore, illegal.33 Unsubstantiated claims as to alleged compliance with the
mandatory provisions of law cannot be favored by this Court. In case of doubt, such cases should be
resolved in favor of labor, pursuant to the social justice policy of our labor laws and Constitution.34

The burden therefore is on respondent to present clear and unmistakable proof that petitioner was
duly served a copy of the notice of termination but he refused receipt. Bare and vague allegations as
to the manner of service and the circumstances surrounding the same would not suffice. A mere copy
of the notice of termination allegedly sent by respondent to petitioner, without proof of receipt, or in
the very least, actual service thereof upon petitioner, does not constitute substantial evidence. It was
unilaterally prepared by the petitioner and, thus, evidently self-serving and insufficient to convince
even an unreasonable mind.

We cannot overemphasize the importance of the requirement on the notice of termination, for we
have ruled in a number of cases35 that non-compliance therewith is tantamount to deprivation of the
employee's right to due process.

This is not the first time that the Court affirmed that there was just cause for dismissal, but held the
employer liable for non-compliance with the procedural due process. In Agabon v. National Labor
Relations Commission,36 we found that the dismissal of the employees therein was for valid and just
cause because their abandonment of their work was firmly established. Nonetheless, the employer
therein was held liable because it was proven that it did not comply with the twin procedural
requirements of notice and hearing for a legal dismissal. However, in lieu of payment of backwages,
we ordered the employer to pay indemnity to the dismissed employees in the form of nominal
damages, thus:

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'. 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.37

The above ruling was further clarified in Jaka Food Processing Corporation v. Pacot.38

In Jaka, the employees were terminated because the corporation was financially distressed.
However, the employer failed to comply with Article 283 of the Labor Code which requires the
employer to serve a written notice upon the employees and the Department of Labor and
Labor II – 1
Employment (DOLE) at least one month before the intended date of termination. We first
distinguished the case from Agabon, to wit:

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.

xxx

A dismissal for just cause under Article 282 implies that the employee concerned has committed, or
is guilty of, some violation against the employer, i.e., the employee has committed some serious
misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his
duties. Thus, it can be said that the employee himself initiated the dismissal process.

On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply
delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by
the employer's exercise of his management prerogative, i.e., when the employer opts to install labor
saving devices, when he decides to cease business operations or when, as in this case, he undertakes
to implement a retrenchment program.39

Then we elucidated on our ruling in Agabon in this wise:

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but
the employer failed to comply with the notice requirement, the sanction to be imposed upon him
should be tempered because the dismissal process was, in effect, initiated by an act imputable to the
employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the
employer failed to comply with the notice requirement, the sanction should be stiffer because the
dismissal process was initiated by the employer's exercise of his management prerogative.40

The Agabon doctrine enunciates the rule that if the dismissal was for just cause but procedural due
process was not observed, the dismissal should be upheld. Where the dismissal is for 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
right to procedural due process. 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 Serrano41 ruling. In
Agabon42 the nominal damages awarded was P30,000.00.

Conformably, the award of backwages by the Labor Arbiter and the NLRC should be deleted and,
instead, private respondent should be indemnified in the amount of P30,000.00 as nominal
damages.43

WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision
dated 14 June 2005 is hereby AFFIRMED WITH MODIFICATION in the sense that while there was a
valid ground for dismissal, the procedural requirements for termination as mandated by law and
jurisprudence were not observed. Respondent Treasure Island Corporation is ORDERED to pay the
amount of P30,000.00 as nominal damages. No costs.

Labor II – 1
 7.) [G.R. NO. 175283 : March 28, 2008]

JACKQUI R. MORENO, Petitioner, v. SAN SEBASTIAN COLLEGE-RECOLETOS,

MANILA, Respondent.

DECISION

CHICO-NAZARIO, J.:

Assailed in this Petition for Review on Certiorari1 under Rule 45 of the Rules of Court is the
Decision2 of the Court of Appeals dated 7 November 2006 in CA-G.R. SP No. 90083. The appellate
court's Decision granted the Special Civil Action for Certiorari filed by respondent San Sebastian
College-Recoletos, Manila (SSC-R), and annulled the Decision3 dated 23 November 2004 and the
Resolution4 dated 31 March 2005 of the National Labor Relations Commission (NLRC) in NLRC-NCR-
CA No. 037175-03.

The undisputed facts of the case are as follows:

Respondent SSC-R is a domestic corporation and an educational institution duly registered under the
laws of the Philippines, located in C. M. Recto Avenue, Quiapo, Manila.

On 16 January 1999, SSC-R employed petitioner Jackqui R. Moreno (Moreno) as a teaching fellow.
On 23 October 2000, Moreno was appointed as a full-time college faculty member.5 Then, on 22
October 2001, Moreno became a member of the permanent college faculty.6 She was also offered the
chairmanship7 of the Business Finance and Accountancy Department of her college on 13 September
2002.

Subsequently, reports and rumors of Moreno's unauthorized external teaching engagements allegedly
circulated and reached SSC-R. The Human Resource Department of the school thereafter conducted a
formal investigation on the said activities. On 24 October 2002, the Department submitted its
report,8 which stated that Moreno indeed had unauthorized teaching assignments at the Centro
Escolar University during the first semester of the School Year 2002-2003, and at the College of the
Holy Spirit, Manila, during the School Years 2000-2001, 2001-2002 and the first semester of School
Year 2002-2003.

On 27 October 2002, Moreno received a memorandum9 from the Dean of her college, requiring her to
explain the reports regarding her unauthorized teaching engagements. The said activities allegedly
violated Section 2.2 of Article II of SSC-R's Faculty Manual,10 which reads:

Administrative permission is required for all full-time faculty members to teach part-time elsewhere.
If ever teaching permission is granted, the total teaching load should not exceed the maximum
allowed by CHED rules and regulations. Faculty members are required to report all other teaching
assignments elsewhere within two (2) weeks from start of the classes every semester.

On 28 October 2002, Moreno sent a written explanation11 in which she admitted her failure to secure
any written permission before she taught in other schools. Moreno explained that the said teaching
engagements were merely transitory in nature as the aforesaid schools urgently needed lecturers and
that she was no longer connected with them. Moreno further stated that it was never her intention to
jeopardize her work in SSC-R and that she merely wanted to improve her family's poor financial
conditions.

Labor II – 1
A Special Grievance Committee was then formed in order to investigate and make recommendations
regarding Moreno's case. The said committee was composed of Dean Abraham Espejo of the College
of Law, as chairman, and Messrs. Dindo Bunag and Ramon Montierro, as members.

In a letter12 dated 11 November 2002, the grievance committee required Moreno to answer the
following series of questions concerning her case, to wit:

1. Did you teach in other schools without first obtaining the consent of your superiors in SSC-R? cralawred

2. Did you ever go beyond the maximum limit for an outside load? cralawred

3. Did you ever truthfully disclose completely to your superiors at SSC-R any outside Load? cralawred

4. Do you deny teaching in CEU? cralawred

5. Do you deny teaching at Holy Spirit?

Moreno answered the above queries in a letter13 dated 12 November 2002. Moreno admitted she did
not formally disclose her teaching loads at the College of the Holy Spirit and at the Centro Escolar
University for fear that the priest administrators may no longer grant her permission, as prior similar
requests had already been declined; that the Dean of her college was aware of her external teaching
loads; that she went beyond the maximum limit for an outside load in the School Years 2000 until
2002, because she needed to support her mother and sister, her masteral studies, and her sister's
canteen business, all of which coincided with the payment of the emergency loan from the SSC-R
administrators that paid for her mother's illness; that she did not deny teaching part-time in the
aforementioned schools; and that she did not wish to resign because she felt she deserved a second
chance.

On the same day that Moreno sent her letter, the grievance committee issued its resolution,14 which
unanimously found that she violated the prohibition against a full-time faculty having an
unauthorized external teaching load. The majority of the grievance committee members
recommended Moreno's dismissal from employment in accordance with the school manual, but Dean
Espejo dissented and called only for a suspension for one semester.

Thereafter, SSC-R sent a letter15 to Moreno that was signed by the College President, informing her
that they had approved and adopted the findings and recommendations of the grievance committee
and, in accordance therewith, her employment was to be terminated effective 16 November 2002.

Moreno thus instituted with the NLRC a complaint for illegal termination against SSC-R, docketed as
NLRC-NCR Case No. 11-10077-02, seeking reinstatement, money claims, backwages, separation pay
if reinstatement is not viable, and attorney's fees.

In the Decision16 dated 30 April 2003, Labor Arbiter Veneranda C. Guerrero dismissed Moreno's
complaint for lack of merit, thus:

WHEREFORE, premises considered, judgment is hereby rendered dismissing the complaint for illegal
dismissal for lack of merit. Respondent San Sebastian College-Recoletos is hereby ordered to pay
complainant Jackqui R. Moreno the amount of NINE THOUSAND ONE HUNDRED FORTY THREE AND
75/100 PESOS (P9,143.75) representing her unpaid salaries.

All other claims are DISMISSED for lack of merit.

The Labor Arbiter ruled that Moreno's due acceptance of the appointment as a member of the
Permanent Faculty meant that she was bound to the condition therein not to accept any outside
Labor II – 1
teaching assignments without permission. Moreno's admission of her violation was likewise said to
have rendered her liable for the penalty of dismissal as provided for in the SSC-R Faculty Manual.
The Labor Arbiter held that SSC-R had adequately discharged the burden of proof imposed by law in
dismissing Moreno. Except for her unpaid salary for fifteen (15) days, which was not controverted,
the rest of Moreno's money claims were denied for being unsubstantiated.

On appeal by Moreno, the NLRC reversed the rulings of the Labor Arbiter in a Decision dated 23
November 2004, the relevant portion of which reads:

The four (4) applications for leave of absence adduced in evidence by the respondent [SSC-R] are all
undated. If the absences indicated in the said documents were the only absences incurred by the
complainant [Moreno] in her four-year tenure, it cannot be said that she had a poor attendance. In
fact, the contrary would be true. On the other hand, it is conceded that in the yearly evaluation of
the performance of teachers, she consistently landed among the five best teachers. Thus, neither can
it be said that her moonlighting activities adversely affected her work performance. Likewise, the
undisputed fact that she was asked to be the chairman of Business Finance and Accountancy for SY
2002-2003 should be considered. This last circumstance could only mean that she was very good at
her job.

There are other extenuating circumstances that should have been taken into consideration in
determining the propriety of the penalty of dismissal meted upon the complainant. These
circumstances are the fact that it was her first offense in four years of unblemished employment, and
the fact that she candidly admitted her fault. x x x

Moreover, it is settled that the existence of some rules agreed upon between the employer and
employee on the subject of dismissal cannot preclude the State from inquiring whether its rigid
application would work too harshly on the employee. (Gelmart Industries Phils. Inc. v. NLRC, 176
SCRA 295 cited in Caltex Refinery Employees Association v. NLRC, 246 SCRA 271).

Thus, in the instant case, it must be concluded that the penalty of dismissal meted upon the
complainant [Moreno] was too harsh and unreasonable under the circumstances. At most, a one-year
suspension with a warning against the repetition of the same offense would have been more in
keeping with the generally accepted principles of law.

WHEREFORE, the decision appealed from is hereby REVERSED. The respondent [SSC-R] is hereby
ordered to REINSTATE the complainant [Moreno] to her former position, and to pay her full
backwages counted from November 16, 2003 up to the date of her actual reinstatement.17

SSC-R filed a Motion for Reconsideration18 of the NLRC Decision, which was denied for lack of merit in
a Resolution19 dated 31 March 2005. chanrobles virtual law library

Thus, SSC-R instituted with the Court of Appeals a Petition for Certiorari under Rule 65 of the Rules
of Court, with a prayer for the issuance of a temporary restraining order and/or a writ of preliminary
injunction,20 docketed as CA-G.R. SP No. 90083, alleging grave abuse of discretion on the part of the
NLRC.

In a Decision21 dated 7 November 2006, the appellate court granted the petition and annulled the
Decision dated 23 November 2004, and Resolution dated 31 March 2005 of the NLRC. In reinstating
the Decision of the Labor Arbiter dated 30 April 2003, the Court of Appeals ruled in this wise:

In the case at bar, there is clearly grave abuse of discretion on the part of the NLRC when it reversed
the Decision of the Labor Arbiter. Its conclusions are highly prejudicial to the interests of herein
petitioner [SSC-R], considering the glaring infractions committed by private respondent [Moreno],
which she even expressly admitted.
Labor II – 1
 xxx

"Willful disobedience of the employer's lawful orders, as a just cause for dismissal of an employee,
envisages the concurrence of at least two (2) requisites: the employee's assailed conduct must have
been willful or intentional, the willfulness being characterized by a wrongful or 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.

The foregoing requisites are all present in this case. The prohibition against unauthorized outside
teaching engagements found in the Faculty Manual and in private respondent's [Moreno]
appointment letter are deemed reasonable under the circumstances. In fact, the petitioner's [SSC-R]
policy is actually permissive since it allows other teaching engagements so long as its president
approves of the same.

Concededly, this policy was made known to private respondent [Moreno] for as mentioned earlier, it
is found not only in the Faculty Manual, but more importantly, it is explicitly stated in her
appointment letter. By her own admission, it cannot be clearer that, in spite of her knowledge
thereof, private respondent [Moreno] willfully disobeyed the said prohibition. When she accepted the
teaching opportunities offered to her by other schools and altogether concealed the same from the
petitioner [SSC-R], she risked being administratively held liable therefor. Thus, the excuses she
raised upon the petitioner's [SSC-R] discovery of such concealment deserve scant consideration.

The policy is obviously in connection with the private respondent's [Moreno] duties as a faculty
member. It is designed to ensure that the petitioner's [SSC-R] teaching staff is well fit to function
accordingly, not only for its benefit, but chiefly, for the students who are under their care and
instruction. Private respondent [Moreno] argues that notwithstanding her violations, her
commitments with petitioner [SSC-R] were never compromised. Be that as it may, this fact cannot
absolve her. She may be fit at the time when her infractions were revealed, but there is no assurance
that her health would not deteriorate in time if she persists in carrying on a heavy workload.

xxx

WHEREFORE, the instant petition is GRANTED. The 23 November 2004 Decision and the 31 March
2005 Resolution of the National Labor Relations Commission (Second Division) are
hereby ANNULLED and SET ASIDE. The National Labor Relations Commission is permanently
enjoined from executing its 31 March 2005 Resolution. The Decision of the Labor Arbiter dated 30
April 2003 is hereby REINSTATED and AFFIRMED.

Accordingly, Moreno now impugns before this Court the Court of Appeals Decision dated 07
November 2006 raising the following issues:

I.

WHETHER OR NOT THE DISMISSAL OF PETITIONER WAS PROPER AND LAWFUL.

II.

WHETHER OR NOT PETITIONER IS ENTITLED TO THE RELIEF SHE SEEKS AGAINST RESPONDENT.

Moreno insists that her right to security of tenure is a more significant consideration in
this case than the strict application of a school policy. She laments that her dismissal from
employment for failing to secure the necessary permission is too harsh and undeserved a
penalty.

Labor II – 1
The most basic of tenets in employee termination cases is that no worker shall be dismissed from
employment without the observance of substantive and procedural due process. Substantive due
process means that the ground upon which the dismissal is based is one of the just or authorized
causes enumerated in the Labor Code. Procedural due process, on the other hand, requires that an
employee be apprised of the charge against him, given reasonable time to answer the same, allowed
ample opportunity to be heard and defend himself, and assisted by a representative if the employee
so desires.22 The employee must be furnished two written notices: the first notice apprises the
employee of the particular acts or omissions for which his dismissal is sought, and the second is a
subsequent notice which informs the employee of the employer's decision to dismiss him.23

Article 282 of the Labor Code provides for the just causes for the termination of employment, to wit:

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

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

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

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

(e) Other causes analogous to the foregoing.

In termination cases, the burden of proof rests on the employer to show that the dismissal is for just
cause. When there is no showing of a clear, valid and legal cause for the termination of employment,
the law considers the matter a case of illegal dismissal and the burden is on the employer to prove
that the termination was for a valid or authorized cause.24

Respondent SSC-R contends that Moreno's dismissal from employment was valid because she
knowingly violated the prohibition embodied in the aforementioned Section 2.2 of Art. II of the SSC-
R Faculty Manual, in accordance with Section 4525 of the Manual of Regulations for Private Schools,
and which prohibition was likewise contained in Moreno's employment contract.26 In so doing,
Moreno allegedly committed serious misconduct and willful disobedience against the
school, and thereby submitted herself to the corresponding penalty provided for in both the Faculty
Manual and the employment contract, which is termination for cause.

On the basis of the evidence on record, the Court finds that Moreno has indeed committed
misconduct against respondent SSC-R. Her admitted failure to obtain the required
permission from the school before she engaged in external teaching engagements is a
clear transgression of SSC-R's policy. However, said misconduct falls below the required
level of gravity that would warrant dismissal as a penalty.

Under Art. 282(a) of the Labor Code, willful disobedience of the employer's lawful orders as a just
cause for termination of employment envisages the concurrence of at least two requisites: (1) the
employee's assailed conduct must have been willful or intentional, the willfulness being
characterized by a "wrongful and perverse attitude"; and (2) the order violated must have
been reasonable, lawful, made known to the employee and must pertain to the duties which he has
been engaged to discharge.27

Similarly, with respect to serious misconduct, the Court has already ruled in National Labor Relations
Commission v. Salgarino28 that:

Labor II – 1
Misconduct is 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 within the meaning
of the act must be of such a grave and aggravated character and not merely trivial or
unimportant. Such misconduct, however serious, must nevertheless be in connection with the work
of the employee to constitute just cause from his separation.

In order to constitute serious misconduct which will warrant the dismissal of an employee under
paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained
of has violated some established rules or policies. It is equally important and required that the
act or conduct must have been performed with wrongful intent. (Emphasis ours.)

After examining the records of the case, the Court finds that SSC-R miserably failed to
prove that Moreno's misconduct was induced by a perverse and wrongful intent as required
in Art. 282(a) of the Labor Code. SSC-R merely anchored Moreno's alleged bad faith on the fact that
she had full knowledge of the policy that was violated and that it was relatively easy for her to secure
the required permission before she taught in other schools. This posture is utterly lacking.

It bears repeating that it is the employer that has the burden of proving the lawful cause sustaining
the dismissal of the employee. Even equipoise is not enough; the employer must affirmatively show
rationally adequate evidence that the dismissal was for a justifiable cause.29

In the present case, SSC-R failed to adduce any concrete evidence to prove that Moreno
indeed harbored perverse or corrupt motivations in violating the aforesaid school policy. In
her letter of explanation to the grievance committee dated 12 November 2002, Moreno explained in
detail her role as the breadwinner and the grave financial conditions of her family. As previous
requests for permission had already been denied, Moreno was thus prompted to engage in illicit
teaching activities in other schools, as she desperately needed them to augment her income. Instead
of submitting controverting evidence, SSC-R simply dismissed the above statements as nothing more
than a "lame excuse"30 and are "clearly an afterthought,"31 considering that no evidence was offered
to support them and that Moreno's salary was allegedly one of the highest among the universities in
the country.

In addition, even if dismissal for cause is the prescribed penalty for the misconduct herein
committed, in accordance with the SSC-R Faculty Manual and Moreno's employment
contract, the Court finds the same to be disproportionate to the offense.

Time and again, we have ruled that while an employer enjoys a wide latitude of discretion in the
promulgation of policies, rules and regulations on work-related activities of the employees, those
directives, however, must always be fair and reasonable, and the corresponding penalties, when
prescribed, must be commensurate to the offense involved and to the degree of the infraction.32

Special circumstances were present in the case at bar which should have been properly taken into
account in the imposition of the appropriate penalty. Moreno, in this case, had readily admitted her
misconduct, which was undisputedly the first she has ever committed against the school. Her
teaching abilities and administrative skills remained apparently unaffected by her external teaching
engagements, as she was found by the grievance committee to be one of the better professors in the
Accounting Department33 and she was even offered the Chairmanship of her college.34 Also, the fact
that Moreno merely wanted to alleviate her family's poor financial conditions is a justification that
SSC-R failed to refute. SSC-R likewise failed to prove any resulting material damage or prejudice on
its part as a consequence of Moreno's misconduct. The claim by SSC-R that the imposition of a lesser
penalty would set a bad precedent35 for the other faculty members who comply with the school
policies is too speculative for this Court to even consider.

Labor II – 1
Finally, the Court notes that in Moreno's contract of employment,36 one of the provisions therein
categorically stated that should a violation of any of the terms and conditions thereof be committed,
the penalty that will be imposed would either be suspension or dismissal from employment. Thus,
contrary to its position from the beginning, SSC-R clearly had the discretion to impose a lighter
penalty of suspension and was not at all compelled to dismiss Moreno under the circumstances, just
because the Faculty Manual said so.

With regard to the observance of procedural due process, neither of the parties has put the same into
issue. Indeed, based on the evidence on record, Moreno was served with the required twin notices
and was afforded the opportunity to be heard. The first notice was embodied in the
memorandum37 dated 27 October 2002 sent by her College Dean, which required her to explain her
unauthorized teaching assignments. The letter38 by SSC-R that informed Moreno that her services
were being terminated effective 16 November 2002 constituted the second required notice. Moreno
was also given the opportunity to explain her side when the special grievance committee asked her a
series of questions pertaining to their investigation in a letter39 dated 11 November 2002 and to
which she replied likewise through a letter40 dated 12 November 2002.

In light of the foregoing, the Court holds that the dismissal of petitioner Moreno failed to comply with
the substantive aspect of due process. Despite SSC-R's observance of procedural due process, it
nonetheless failed to discharge its burden of proving the legality of Moreno's termination from
employment. Thus, the imposed penalty of dismissal is hereby declared as invalid.

In so ruling, this Court does not depreciate the misconduct committed by Moreno. Indeed, SSC-R has
adequate reasons to impose sanctions on her. However, this should not be dismissal from
employment. Because of the serious implications of this penalty, "our Labor Code decrees that an
employee cannot be dismissed, except for the most serious causes."41

Considering the presence of extenuating circumstances in the instant case, the Court deems it
appropriate to impose the penalty of suspension of one (1) year on Moreno, to be counted from 16
November 2002, the effective date of her illegal dismissal. However, given the period of time in
which Moreno was actually prevented from working in the respondent school, the said suspension
should already be deemed served.

Furthermore, the Court holds that Moreno should be reinstated to her former position, without loss of
seniority rights and other privileges, but without payment of backwages.

As a general rule, the normal consequences of a finding that an employee has been illegally
dismissed are, firstly, that the employee becomes entitled to reinstatement without loss of seniority
rights; and secondly, the payment of backwages corresponding to the period from his illegal
dismissal up to his actual reinstatement. The two forms of relief are, however, distinct and separate
from each other. Though the grant of reinstatement commonly carries with it an award of
backwages, the appropriateness or non-availability of one does not carry with it the
inappropriateness or non-availability of the other.42

In accordance with Durabuilt Recapping Plant & Co. v. National Labor Relations Commission,43 the
Court may not only mitigate, but also absolve entirely, the liability of the employer to pay backwages
where good faith is evident. Likewise, backwages may be withheld from a dismissed employee where
exceptional circumstances are availing.44

In the present case, the good faith of SSC-R is apparent. The termination of Moreno from her
employment cannot be said to have been carried out in a malevolent, arbitrary or oppressive
manner. Indeed, the only mistake that the respondent school has committed was to strictly apply the
provisions of its Faculty Manual and its contract with Moreno without regard for the aforementioned
special circumstances that were attendant in this case. Even then, Moreno's right to procedural due

Labor II – 1
process was fully respected, as she was given the required twin notices and an ample opportunity to
be heard. This fact was not even disputed by Moreno herself.

With respect to Moreno's claim for moral and exemplary damages, the same were never satisfactorily
pleaded and substantiated.45 Thus, they are hereby denied. Neither is Moreno entitled to the award of
the monetary claims46 in her petition, as no basis and proof for the grant thereof were ever adduced.

The Court cannot likewise award attorney's fees to Moreno in view of the above-mentioned finding of
good faith on the part of SSC-R47 . It is a well-settled principle that even if a claimant is compelled to
litigate with third persons or to incur expenses to protect the claimant's rights, attorney's fees may
still not be awarded where no sufficient showing of bad faith could be reflected in a party's
persistence in a case other than an erroneous conviction of the righteousness of his cause.48

WHEREFORE, the Petition for Review is GRANTED. The Decision of the Court of Appeals in CA-G.R.
SP No 90083 dated 7 November 2006 is hereby REVERSED. Respondent San Sebastian College-
Recoletos, Manila, is hereby ordered to reinstate Petitioner Jackqui R. Moreno without loss of
seniority rights and other privileges. No pronouncement as to cost.

Labor II – 1
 8.) [G.R. NO. 172528 : February 26, 2008]

JANSSEN PHARMACEUTICA, Petitioner, v. BENJAMIN A. SILAYRO, Respondent.

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
Decision,1 dated 8 February 2006, promulgated by the Court of Appeals in CA-G.R. SP No. 81983,
reversing the Decision2 dated 7 May 2003 of the National Labor Relations Commission (NLRC) in
NLRC Case No. V-000880-99. The Court of Appeals, in its assailed Decision, adjudged the dismissal
of respondent Benjamin Silayro by petitioner Jansen Pharmaceutica as illegal for being an excessive
and unwarranted penalty. The appellate court determined that the suspension of the respondent for
five months without salary as just penalty.

Petitioner is the division of Johnson & Johnson Philippines Inc. engaged in the sale and manufacture
of pharmaceutical products. In 1989, petitioner employed respondent as Territory/Medical
Representative. During his employment, respondent received from petitioner several awards and
citations for the years 1990 to 1997, such as Territory Representative Award, Quota Buster Award,
Sipag Award, Safety Driver's Award, Ring Club Award, and a Nomination as one of the Ten
Outstanding Philippine Salesmen.3 On the dark side, however, respondent was also investigated for,
and in some cases found guilty of, several administrative charges.

Petitioner alleged that in 1994, respondent was found guilty of granting unauthorized premium/free
goods to and unauthorized pull-outs from customers.4 Petitioner failed to attach records to support
its allegation and to explain the nature of and the circumstance surrounding these infractions.
Respondent, for his part, admitted to have been guilty of granting unauthorized premium/free goods,
but vehemently denied violating the rule on, or having been charged with, unauthorized pull-outs
from customers.5

The respondent was also investigated for dishonesty in connection with the Rewards of Learning
(ROL) test. The ROL test is a one-page take-home examination, with two questions to be answered
by an enumeration of the standards of performance by which territory representatives are rated as
well as the sales competencies expected of territory representatives.6 It was discovered that
respondent's answers were written in the handwriting of a co-employee, Joedito Gasendo.
Petitioner's management then sent respondent a Memo dated 27 July 1998 requiring an explanation
for the incident.7

Soon thereafter, petitioner sent a subsequent Memo dated 20 August 1998 to respondent requiring
the latter to explain his delay in submitting process reports.8

On 8 September 1998, respondent submitted a written explanation to the petitioner stating that the
delay in the submission of reports was caused by the deaths of his grandmother and his aunt, and
the hospitalization of his mother. He also averred that he had asked his co-employee Joedito
Gasendo to write his answers to the ROL test because at the time when the examination was due, he
already needed to leave to see his father-in-law, who was suffering from cancer and confined in a
hospital in Manila.9

Respondent was sent a new Memorandum dated 20 October 1998 for his delayed submission of
process reports due on 14 October 1998.10

Labor II – 1
Respondent was issued another Memo also dated 20 October 1998 regarding the discrepancies
between the number of product samples recorded in his Daily/Weekly Coverage Report (DCR) and
the number of product samples found in his possession during the 14 October 1998 audit.11 The
actual number of sample products found in respondent's possession exceeded the number of sample
products he reported to petitioner.

Respondent explained, through a "Response Memo" dated 24 October 1998, that he failed to count
the quantity of samples when they were placed in his custody. Thus, he failed to take note of the
excess samples from previous months. He, likewise, admitted to committing errors in posting the
samples that he distributed to some doctors during the months of August and September 1998.12

On 20 November 1998, petitioner issued a Notice of Disciplinary Action finding respondent guilty of
the following offenses (1) delayed submission of process reports, for which he was subjected to a
one-day suspension without pay, effective 24 November 1998;13 and (2) cheating in his ROL test, for
which he was subjected again to a one-day suspension.14

On the same date, petitioner likewise issued a Notice of Preventive Suspension against respondent
for "Dishonesty in Accomplishing Other Accountable Documents" in connection with the discrepancy
between the quantities of sample products in respondent's report and the petitioner's audit for the
September 1998 cycle. In addition, the Notice directed the respondent to surrender to the petitioner
the car, promotional materials, and all other accountabilities on or before 25 November 1998. It was
also stated therein that since this was respondent's third offense for the year, he could be dismissed
under Section 9.5.5(c) of petitioner's Code of Conduct.15

Before 25 November 1998 or the date given by petitioner for respondent to surrender all his
accountabilities, a Memorandum dated 24 November 1998 was issued to respondent for the following
alleged infractions: (1) Failure to turn over company vehicles assigned after the receipt of instruction
to that effect from superiors, and (2) Refusing or neglecting to obey Company management orders to
perform work without justifiable reason.16

Respondent wrote a letter dated 26 November 1998 addressed to the petitioner explaining that he
failed to surrender his accountabilities because he thought that this was tantamount to an admission
that the charges against him were true and, thus, could result in his termination from the job.17

An administrative investigation of the respondent's case was held on 3 December 1998. Respondent
was accompanied by union representative Lyndon Lim. The parties discussed matters concerning the
discrepancy in respondent's report and petitioner's audit on the number of product samples in
respondent's custody in September 1998. They were also able to clarify among themselves
respondent's failure to return his accountabilities and, as a consequence, respondent promised to
surrender the same. They further agreed that another administrative hearing will be set, but no
further hearings were held.18

In line with his promise to surrender his accountabilities, respondent wrote a letter, dated 9
December 1998, asking his superiors where he should return his accountabilities.19 Union
representative Dominic Regoro also made requests, on behalf of respondent, for instructions, to
whom petitioner's District Supervisor Raymond Bernardo replied via electronic mail on 16 December
1998. According to Bernardo, he was still in the process of making arrangements with Ruben Cauton,
petitioner's National Sales Manager, in connection with the return of respondent's
accountabilities.20 Respondent maintained that he did not receive any instructions from petitioner.

In a letter dated 28 December 1998, petitioner terminated the services of

respondent.21 Petitioner found respondent guilty of dishonesty in accomplishing the report
on the number of product samples in his possession and failing to return the company
vehicle and his other accountabilities in violation of Sections 9.2.9 and 9.2.4 of the Code of

Labor II – 1
Conduct.22 Petitioner also found respondent to be a habitual offender whose previous
offenses included: (1) Granting unauthorized premium/free goods to customer in 1994;
(2) Unauthorized pull-out of stocks from customer in 1994; (3) Delay in submission of
reports despite oral admonition and written reprimand in 1998; and (4) Dishonesty in
accomplishing other accountable documents or instruments (in connection with the ROL
test) in 1998.

Even after respondent's termination from employment, there was still contact between petitioner and
respondent regarding the latter's accountabilities still in his possession. Sometime in early 1999, in a
telephone conversation, respondent informed petitioner that he will return his accountabilities only
upon demand from the proper governmental agency.23 A demand letter dated 3 February 1999 was
sent to respondent by petitioner ordering the return of the company car, promotional materials,
samples, a slide projector, product manuals, product monographs, and training binders.24

On 14 January 1999, respondent filed a Complaint25 against petitioner and its officers, Rafael Besa,
Rueben Cauton, Victor Lapid, and Raymond Bernardo before the Sub-Regional Arbitration Branch of
the NLRC in Iloilo City for (a) Unfair Labor Practice; (b) Illegal Dismissal; (c) Reimbursement of
operating and representation expenses under expense reports for October and November 1998; (d)
Nonpayment of salary, bonuses and other earned benefits for December 1998 like rice allocation,
free goods allocation, etc.; and (e) Damages and attorney's fees.

In a Decision dated 31 August 1999, the Labor Arbiter ruled that respondent committed infractions
which breached company rules, and which were sufficient grounds for dismissal. However, the Labor
Arbiter found the penalty of dismissal to be too harsh considering the respondent's circumstances
and ordered his reinstatement without payment of back wages.26 The dispositive portion of the
Decision states that:

WHEREFORE, premises considered, judgment is rendered ordering respondents firm to reinstate

complainant to his former or equivalent position without backwages.

All other claims are hereby dismissed.27

On appeal, the NLRC modified the Decision of the Labor Arbiter by declaring that reinstatement was
improper where respondent was dismissed for just and authorized causes.28 In a Decision dated 7
May 2003, it pronounced that:

WHEREFORE, premises considered, complainant's appeal is hereby DISMISSED. The decision of

the Labor Arbiter is hereby AFFIRMED with MODIFICATION deleting the award of reinstatement.29

Respondent filed a Petition for Certiorari under Rule 65 of the Rules of Court before the Court of
Appeals. In reversing the Decision of the NLRC, the appellate court pronounced that the causes were
insufficient for the dismissal of respondent since respondent's acts were not motivated by dishonesty,
but were caused by mere inadvertence. Thus, it concluded that the offenses committed by
respondent merited only a penalty of suspension for five months without pay. The appellate court
also noted that petitioner committed some lapses in its compliance with procedural due process. It
further took into account the successive deaths and sickness in respondent's family.30 The dispositive
part of the decision reads:

WHEREFORE, premises considered, the petition is GRANTED. Thus, the Decision and Resolution

respectively dated 7 May 2003 and 14 October 2003 are hereby SET ASIDE. Accordingly, Judgment
is hereby rendered:

a) Declaring petitioner's dismissal to be illegal;

Labor II – 1
b) Reinstating petitioner to the same or equivalent position without loss of seniority rights and other
privileges;

c) Ordering the payment of backwages (inclusive of allowances and other benefits or their monetary
equivalent), computed from the time compensation was withheld up to the time of actual
reinstatement; Provided that, from such computed amount of backwages, a deduction of five (5)
months' (sic) salary be made to serve as penalty; and cralawlibrary

d) If reinstatement is no longer feasible, ordering the payment of separation pay comprising of one
month salary per year of service computed from date of employment up to finality of this decision, in
addition to the award of backwages.

Let the records of this case be remanded to the Labor Ariter a quo for the proper computation of the
foregoing.31

Hence, this Petition, wherein the following issues were raised:

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE UNIFORM FACTUAL
FINDINGS OF THE NLRC AND THE LABOR ARBITER.

II

WHETHER OR NOT RESPONDENT'S DISMISSAL FOR HIS FAILURE TO TRUTHFULLY ACCOMPLISH

REPORTS, DELIBERATE AND REPEATED FAILURE TO SUBMIT REQUIRED REPORTS AND HIS
DELIBERATE DISREGARD OF HIS SUPERIOR'S ORDER TO SURRENDER HIS ACCOUNTABILITIES
TANTAMOUNT TO DISHONESTY, GROSS AND HABITUAL NEGLECT OF DUTY, WILLFUL DISOBEDIENCE
OF COMPANY POLICY, AND BREACH OF TRUST AND CONFIDENCE REPOSED IN HIM BY THE
COMPANY UNDER THE PROVISIONS OF THE LABOR CODE WAS LEGAL, VALID AND CARRIED OUT
WITH DUE PROCESS

III

WHETHER OR NOT THE TOTALITY OF INFRACTIONS COMMITTED BY RESPONDENT FURTHER

MERITED HIS TERMINATION FROM THE COMPANY'S EMPLOY

IV

WHETHER OR NOT THE RESPONDENT HAS ANY BASIS FOR CLAIMING AN AWARD OF
REINSTATEMENT AND BACKWAGES.32

This petition is without merit.

The main question in this case is whether or not sufficient grounds existed for the
dismissal of the respondent. To constitute a valid dismissal from employment, two requisites must
concur: (1) the dismissal must be for any of the causes provided in Article 282 of the Labor Code;
and, (2) the employee must be given an opportunity to be heard and to defend himself.33

In this case, the Court must re-examine the factual findings of the Court of Appeals, as well as the
contrary findings of the NLRC and Labor Arbiter. While it is a recognized principle that this Court is
not a trier of facts and does not normally embark in the evaluation of evidence adduced during trial,
this rule allows for exceptions.34 One of these exceptions covers instances when the findings of fact of

Labor II – 1
the trial court, or in this case of the quasi-judicial agencies concerned, are conflicting or contradictory
with those of the Court of Appeals.35

In the termination letter dated 28 December 1998, respondent was dismissed on the ground that he
committed the following offenses: (1) dishonesty in accomplishing the report on the number of
product samples in his possession; and (2) his failure to return the company vehicle and other
accountabilities in violation of Sections 9.2.9 and 9.2.4 of the Code of Conduct. In addition to these
offenses, petitioner took into account that the petitioner committed the following infractions in the
past: (1) granting unauthorized premium/free goods in 1994; (2) unauthorized pull-outs from
customers in 1995; (3) cheating during the ROL exam in 1998; and (4) three infractions of delayed
process reports in 1998.

Initially, the Court must determine whether the respondent violated the Code of Conduct with his
dishonesty in accomplishing his report on product samples and/or failure to return the company
vehicle and other such accountabilities. The records of this case negate a finding of such culpability
on the part of the respondent.

Petitioner failed to present evidence that respondent was guilty of dishonesty in accomplishing the
DCR, wherein he was supposed to indicate the number of product samples in his possession for
August and September 1998. Petitioner merely relied on the fact that the number of product samples
the respondent reported was incorrect, and the number of product samples later found in his
possession exceeded that which he reported. Respondent admitted that when the product samples
had arrived, he failed to check if the number of product samples indicated in the DCR corresponded
to the number actually delivered and that he made mistakes in posting the product samples
distributed during the period in question.

In termination cases, the burden of proof rests with the employer to show that the dismissal is for
just and valid cause. Failure to do so would necessarily mean that the dismissal was not justified and
therefore was illegal.36 Dishonesty is a serious charge, which the employer must adequately prove,
especially when it is the basis for termination.

In this case, petitioner had not been able to identify an act of dishonesty, misappropriation, or any
illicit act, which the respondent may have committed in connection with the erroneously reported
product samples. While respondent was admittedly negligent in filling out his August and September
1998 DCR, his errors alone are insufficient evidence of a dishonest purpose. Since fraud implies
willfulness or wrongful intent, the innocent non-disclosure of or inadvertent errors in
declaring facts by the employee to the employer will not constitute a just cause for the
dismissal of the employee.37 In addition, the subsequent acts of respondent belie a design to
misappropriate product samples. So as to escape any liability, respondent could have easily just
submitted for audit only the number of product samples which he reported. Instead, respondent
brought all the product samples in his custody during the audit and, afterwards, honestly admitted to
his negligence. Negligence is defined as the failure to exercise the standard of care that a reasonably
prudent person would have exercised in a similar situation.38 To this Court, respondent did not
commit any willful violation, rather he merely failed to exercise the standard care required of a
territory representative to carefully count the number of product samples delivered to him in August
and September 1998.

In the Memorandum dated 20 November 1998, petitioner ordered respondent to return the company
vehicle and all other accountabilities by 25 November 1998. Petitioner issued its first notice on 24
November 1998, even before respondent was obligated to return his accountabilities. Hence,
respondent could not yet have committed any offense when petitioner issued the first notice.
Confused by petitioner's arbitrary action, respondent did not return his accountabilities, but
immediately explained in a letter dated 26 November 1998 his reasons for failing to return his
accountabilities on 25 November 1998 as previously ordered by the petitioner.

Labor II – 1
During the company hearing held on 3 December 1998, respondent offered to return his
accountabilities in accordance with the instructions to be given by the petitioner. In a letter dated 9
December 1998 addressed to the petitioner, respondent reiterated his request for instructions on the
return of his accountabilities. There is no showing that petitioner replied to respondent's letter. The
letter written by petitioner's District Supervisor Raymond Bernardo to union representative Dominic
Regoro sent through electronic mail on 16 December 1998 still provided no definite instructions to
the respondent for the return of his accountabilities. This is the last communication between the
parties on the matter until petitioner wrongfully dismissed the respondent on 28 December 1998 for
deliberately refusing to surrender his accountabilities, among other grounds. The petitioner does not
refer in its pleadings to any instance after the company hearing was held and before the respondent
was dismissed wherein it had finally instructed the respondent as to how he may turn over his
accountabilities. Per petitioner's pleadings, belated demands for the surrender of respondent's
accountabilities were made in January and February 1999, after respondent had already been
dismissed. Clearly, the charge against respondent of insubordination to the petitioner's instructions
for the surrender of his accountabilities was unfounded since the respondent was still waiting for said
instructions when he was dismissed.

Moreover, petitioner failed to observe procedural due process in connection with the aforementioned
charge. Section 2(d) of Rule 1 of The Implementing Rules of Book VI states that:

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

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

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

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

From the aforecited provision, it is implicit that these requirements afford the employee an
opportunity to explain his side, respond to the charge, present his or her evidence and rebut the
evidence presented against him or her.

The superficial compliance with two notices and a hearing in this case cannot be considered valid
where these notices were issued and the hearing made before an offense was even committed. The
first notice, issued on 24 November 1998, was premature since respondent was obliged to return his
accountabilities only on 25 November 1998. As respondent's preventive suspension began on 25
November 1998, he was still performing his duties as territory representative the day before, which
required the use of the company car and other company equipment. During the administrative
hearing on 3 December 1998, both parties clarified the confusion caused by the petitioner's
premature notice and agreed that respondent would surrender his accountabilities as soon as the
petitioner gave its instructions. Since petitioner's ostensible compliance with the procedural
requirements of notice and hearing took place before an offense was even committed, respondent
was robbed of his rights to explain his side, to present his evidence and rebut what was presented
against him, rights ensured by the proper observance of procedural due process.

Of all the past offenses that were attributed to the respondent, he contests having committed the
infraction involving the unauthorized pull-outs from customers, allegedly made in 1994. Again, the
records show that petitioner did not provide any proof to support said charge. It must be emphasized
at this point that the onus probandi to prove the lawfulness of the dismissal rests with the
employer,39 and in light of petitioner's failure to discharge the same, the alleged offense cannot be

Labor II – 1
given any credence by this Court. As for the three remaining violations, it is unquestioned that
respondent had committed and had already been punished for them.

While a penalty may no longer be imposed on offenses for which respondent has already
been punished, these offenses, among other offenses, may still be used as justification for
an employee's dismissal. Hence, this Court must now take into consideration all the offenses that
respondent committed during his employment and decide whether these infractions, taken together,
constitute a valid cause for dismissal.

Undoubtedly, respondent was negligent in reporting the number of product samples in his custody for
August and September 1998. He also committed three other offenses in the past. First, he was found
guilty of and penalized for granting unauthorized free goods in 1994. Secondly, he incurred delays in
submitting his process reports for August, September and October 1998, for which charge he was
punished with one-day suspension. Lastly, he cheated in an ROL test in July 1998 for which he was
punished with another one-day suspension.

Respondent's offense of granting unauthorized free goods was vaguely discussed. Petitioner did not
offer any evidence in this connection; it was given credence only because of respondent's admission
of the same. What acts constituted this offense and the circumstances surrounding it were not
explained. However, the records show that in the same year it was committed, in 1994, petitioner
still gave respondent two awards: membership to the Wild Boar Society and the Five-Year Service
Award.40 Absent any explanation which would give this offense substantial weight and importance, it
can only be presumed that petitioner did not consider the offense as sufficiently momentous to
disqualify respondent from receiving an award or to even just issue the respondent a warning that a
subsequent offense would result in the termination of his employment.

The rest of the infractions imputed to the respondent were committed during the time he was
undergoing serious family problems. His inability to comply with the deadlines for his process reports
and his lack of care in accounting for the product samples in his custody are understandably the
result of his preoccupation with very serious problems. Added to the pressure brought about by the
numerous charges he found himself facing, his errors and negligence should be viewed in a more
compassionate light.

Petitioner's inability to keep up with his deadlines and his carelessness with his report on product
samples during a difficult time in his life are in no way comparable to the transgressions in the cases
cited by petitioner involving other territory representatives - Chua v. National Labor Relations
Commission41 and Gustilo v. Wyeth Philippines.42 In the Chua case, it was not a mere case of delay in
the submission of reports and the occasional mistakes in the DCR, but an established pattern of
inattention in the submission and accomplishing of his reports. The employee therein did not even
submit some of the DCRs, while other DCRs were belatedly submitted in batches covering two to
three months. Doctors' call cards lacked either the corresponding dates or the signatures of the
doctors concerned. In the Gustillo case, the employee falsified his application form, a gasoline
receipt, a report of his trade outlet calls, and misused his leaves. Evidently, the employee in this case
misappropriated company resources by making claims for falsified expenses and making personal
calls in lieu of trade outlet calls. In this case, respondent had not defrauded the petitioner of its
property.

The gravest charge that the respondent faced was cheating in his ROL test. Although he avers that
he formulated the answers himself and that he merely allowed his co-employee Joedito Gasendo to
write down his answers for him, this Court finds this excuse to be very flimsy. The ROL test consists
of one page and two straightforward questions, which can be answered by more or less ten
sentences. Respondent could have spared the few minutes it would take to write the examination. If
he had lacked the time due to a family emergency, a request for an extension would have been the
more reasonable and honest alternative.

Labor II – 1
Despite the disapproving stance taken by this Court against dishonesty, there have been
instances when this Court found the ultimate penalty of dismissal excessive, even for
cases which bear the stigma of deceit.

In Philippine Long Distance Telephone Company v. National Labor Relations Commission, 43 an
employee intervened in the anomalous connection of four telephone lines. It was, likewise,
established in Manila Electric Company v. National Labor Relations Commission, 44 that the employee
was involved in the illegal installation of a power line. In both cases, the violations were clearly
prejudicial to the economic activity of his employer. Finally, in National Labor Relations Commission
v. Salgarino,45 a school teacher tampered with the grades of her students, an act which was
prejudicial to the school's reputation. Notably, the Court stopped short of dismissing these employees
for offenses more serious than the present case.

In this case, the ROL test is a take-home examination intended to check a territory representative's
understanding of information already contained in their Sales Career Manual, wherein the examinees
are even instructed to refer to their manuals. The improper taking of this test, while it puts into
question the examinee's moral character, does not result in any potential loss of property or damage
to the reputation of the employer. Nor does respondent's previous performance show lack of
knowledge required in his sales career. Additionally, the dishonesty practiced by the employee did
not involve company property that was placed in his custody. Furthermore, the gravity of this offense
is substantially diminished by the fact that petitioner itself had thought it unimportant enough to
merit only a one-day suspension. The respondent's ten years of commendable performance cannot
be cancelled out by a single mistake made during a difficult period of his life, a mistake that did not
pose a potential danger to his employer.

The special circumstances of this case - - respondent's family crises, the duration of his
employment, and the quality of his work during the previous years - - must necessarily
influence the penalty to be meted out to the respondent. It would be a cruel disregard of
the constitutional guarantee of security of tenure to impose the penalty of dismissal,
without giving due consideration to the ill fortune that may befall a normally excellent
employee.

In National Labor Relations Commission v. Salgarino,46 special consideration was given to the fact
that the respondent therein had been in the employ of the petitioners therein for 10 years and that
she was a recipient of numerous academic excellence awards and recognized by her students and
some of her peers in the profession as a competent teacher. The Court, in other cases, has
repeatedly ruled that in determining the penalty to be imposed on an erring employee, his or her
length of service must be taken into account.47 In Brew Master International, Inc., v. National
Federation of Labor Unions,48 the emotional, psychological, spiritual and physical stress and strain
undergone by the employee during a family crisis were regarded as special circumstances which
precluded his dismissal from service, despite his prolonged absence from work. The Court explains
the circumspection it exercises when faced with the imposition of the extremely severe penalty of
dismissal thus:

The employer's prerogative to discipline its employee must be exercised without abuse of
discretion. Its implementation should be tempered with compassion and understanding.
While an employer has the inherent right to discipline its employees, we have always held
that this right must always be exercised humanely, and the penalty it must impose should
be commensurate to the offense involved and to the degree of its infraction. The employer
should bear in mind that, in the exercise of such right, what is at stake is not the employee's position
but her livelihood as well. The law regards the workers with compassion. Even where a worker has
committed an infraction, a penalty less punitive may suffice, whatever missteps may be committed
by labor ought not to be visited with a consequence so severe. This is not only the law's concern for

Labor II – 1
workingman. There is, in addition, his or her family to consider. Unemployment brings untold
hardships and sorrows upon those dependent on the wage-earner.49

Respondent's violations of petitioner's Code of Conduct, even if taken as a whole, would not fall
under the just causes of termination provided under Article 282 of the Labor Code.50 They are mere
blunders, which may be corrected. Petitioner failed to point out even a potential danger that
respondent would misappropriate or improperly dispose of company property placed in his custody. It
had not shown that during his employment, respondent took a willfully defiant attitude against it. It
also failed to show a pattern of negligence which would indicate that respondent is incapable of
performing his responsibilities. At any other time during his employment, respondent had shown
himself a commendable worker.

Nonetheless, the infractions committed by the respondent, while disproportionate to a penalty of

dismissal, will not be overlooked. The suspension of five months without pay, imposed by the Court
of Appeals, would serve as a sufficient and just punishment for his violations of the company's Code
of Conduct.

IN VIEW OF THE FOREGOING, the instant Petition is DISMISSED and the assailed Decision of the
Court of Appeals in CA-G.R. SP No. 81983, promulgated on 8 February 2006, is AFFIRMED. Costs
against the petitioner.

Labor II – 1
9.) G.R. No. 146762            January 30, 2007

CULVER B. SUICO, TERESA D. CENIZA and RONALD R. DACUT, Petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
(PLDT)/ AUGUSTO G. COTELO, Respondents.

x-------------------x

G.R. No. 153584            January 30, 2007

BENIGNO MARIANO, JR., Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, PHILIPPINE LONG DISTANCE TELEPHONE COMPANY
(PLDT), Respondents.

x-------------------x

G.R. No. 163793            January 30, 2007

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY (PLDT), Petitioner,

vs.
ERNESTO BORJE, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

By Resolution dated January 17, 2005,1 the Court ordered the consolidation of the Petitions for Review
on Certiorari under Rule 45 of the Rules of Court docketed as G.R. No. 146762,2 G.R. No. 153584,3 and G.R. No.
163793.4

They involve parallel facts and issues:

G.R. No. 146762

Culver B. Suico, Teresa D. Ceniza, and Ronald R. Dacut (complainants) were regular employees of Philippine Long
Distance Telephone Company (PLDT) Cebu Jones Exchange and members of Manggagawa ng Komunikasyon ng
Pilipinas (MKP). In September 1997, MKP launched a strike against PLDT. Complainants participated in the strike
by picketing the PLDT.5

Acting Department of Labor and Employment (DOLE) Secretary Crescencio Trajano assumed jurisdiction over the
labor dispute and issued a Return-to-Work Order on September 20, 1997.6 MKP did not heed said order but merely
filed an Opposition7 thereto. In an Order8 dated September 29, 1997, DOLE Secretary Leonardo A.
Quisumbing9 denied MKP’s Opposition.

Meanwhile, at the PLDT, complainants continued with their strike. On September 29, 1997, Ann Detelou Fernando
(Fernando), a PLDT managerial employee, sustained injuries when strikers blocked her way to the premises of
PLDT. Complainants were implicated in said incident. Hence, Emiliano Tanchico (Tanchico), PLDT Vice-President
for Personnel Management and Development Center, sent to complainants separate notices dated October 8, 1997,
which uniformly read:

Please explain in writing why you should not be terminated for committing the following act:

Labor II – 1
On September 30, 1997, while participating in an obviously illegal strike, you physically assaulted Ms. A Fernando,
a Traffic Supervisor. Attached as Annex "A" is the statement of Ms. Fernando.

xxxx

Your illegal act has seriously prejudiced the company’s operations, is a violation of the Code of Conduct and is
considered, among others, serious misconduct, which is a ground for termination under Article 282 of the Labor
Code.

Kindly submit your notarized explanation to your Division Head within 48 hours from receipt of this Notice. Failure on
your part to submit a written explanation within the given period shall constitute a waiver of your right to be heard. 10

Annex "A" to said notices is an unsworn statement in which Fernando gave a detailed account of the illegal act
imputed to complainants.11

Complainants did not file any explanation. Tanchico sent them two other sets of notices dated October 14,
199712 and October 24, 1997.13

On October 27, 1997, complainants sent Tanchico separate but uniformly-worded letters which read:

This concerns your memo dated October 8, 1997 xxx.

In this regard, I hereby elect to exercise my right to be heard and defend myself in a formal hearing, to be set within
five (5) days from my receipt of the documents hereinafter requested, pursuant to my right to due process and par.
2.5 of PLDT Systems Practice re the Handling of Administrative Cases. Moreover, kindly furnish me with the copies
of formal (written) complaint filed against me as well as statements of witness(es) and preliminary investigation
report(s) regarding the complaint, if any.

My election to exercise my right to be heard and defend myself in a formal hearing is without prejudice to my right to
submit a written explanation at a later time, which I hereby expressly reserve.14

PLDT Division Head Augusto Cotelo (Cotelo) replied on November 3, 1997 that PLDT was deferring action on the
request for formal hearing until complainants shall have filed their answers to the charges. Cotelo wrote:

Please submit the notarized explanation that we required in our letters of October 8 & 14, 1997 within forty-eight
(48) hours upon receipt of this letter, before we can consider any formal hearing. Please be reminded that we shall
consider your failure to comply as a waiver of your right to be heard, and accordingly decide on the charges against
you on the basis of the evidence on hand. 15 (Emphasis ours)

Complainants merely reiterated their request for formal hearing. Thus, Cotelo sent them termination notices dated
November 19, 1997 which read:

In light of the repeated demands and your consistent failure to provide the required written explanation for the
following acts:

On September 30, 1997, while participating in an obviously illegal strike, you physically assaulted Ms. A. Fernando,
a Traffic Supervisor. PLDT has proceeded to consider the charges against you for violation of Article 264 of the
Labor Code and for serious misconduct.

Based on the available evidence, the written copy of which were duly sent to you, the Company finds you guilty as
charged. The Company cannot see any reason why the evidence that the statements we considered were
motivated by any purpose other than to bear witness to the truth. We find these evidence direct and positive
identification of your participation in and commission of the illegal act charged.

Labor II – 1
Your act constitutes a just cause for termination under the Labor Code which authorizes an employer to terminate
an employee for serious misconduct and which prohibits the commission of any act of violence, coercion or
intimidation, or the obstruction of free ingress and egress, during a strike (see Art. 282-A & 264, Labor Code). There
is also the additional attendant circumstances that you committed these acts during a strike that was illegally
declared and conducted. Your services with Philippine Long Distance Telephone Company are consequently
terminated effective upon receipt of this letter.16

Complainants filed a Complaint for illegal dismissal and damages with the Labor Arbiter (LA). In a Decision dated
July 15, 1998, the LA declared the dismissal of complainants illegal and ordered their reinstatement.17

PLDT appealed to the National Labor Relations Commission (NLRC) which, in its January 3, 2000 Decision,
reversed and set aside the July 15, 1998 LA Decision, thus:

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and VACATED and a
new one entered DISMISSING the instant complaint.

SO ORDERED.18

Complainants filed a Motion for Reconsideration which the NLRC denied in its Resolution dated March 27, 2000.19

Thereafter, complainants filed a Petition for Certiorari under Rule 65 with the Court of Appeals (CA) but the latter
dismissed it in a Decision20 dated September 22, 2000, the dispositive portion of which states:

WHEREFORE, premises considered, the petition is DISMISSED and the assailed decision and resolution are
affirmed.

SO ORDERED. 21

The Motion for Reconsideration filed by complainants was denied by the CA in its January 11, 2001 Resolution.22

And so, the present Petition for Review where complainants question the CA for its September 22, 2000 Decision
and January 11, 2001 Resolution on the sole ground that:

THE COURT OF APPEALS HAS DECIDED THE INSTANT DISPUTE IN A WAY NOT IN ACCORD WITH LAW
AND JURISPRUDENCE WHEN IT REFUSED TO CONSIDER THAT THE DISMISSAL OF HEREIN
PETITIONNERS WAS MADE IN VIOLATION OF THEIR RIGHT TO PROCEDURAL DUE PROCESS.23

G.R. No. 153584

Benigno Mariano, Jr. (Mariano) was an employee of PLDT Laoag City Sub-Exchange and an officer of MKP. During
the September 1997 strike which MKP launched against PLDT, Mariano led a picket of the premises of the
PLDT.24 In said picket, Melvyn T. Guillermo (Guillermo), a PLDT subscriber, suffered injury and humiliation at the
hands of a striker. In his letter to PLDT, Guillermo identified Mariano as the culprit and demanded that the latter be
dismissed.25

Acting on the complaint of Guillermo, Tanchico sent Mariano the following notice dated October 13, 1997:

Please explain in writing why you should not be terminated for committing the following act:

On 19 September 1997, at around 11:50 a.m., you verbally and physically assaulted MELVYN T. GUILLERMO, a
PLDT subscriber xxx. Attached for your reference as Annex "A" is the letter-complaint of Mr. Guillermo.

This act is illegal and violates express provisions of the Labor Code which among others provide:

ART. 264.
Labor II – 1
 xxxx

(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.

Additionally, as provided in the law, any worker who knowingly participates in the commission of illegal acts during a
strike may be declared to have lost his employment status.

Your illegal act has seriously prejudiced the company’s operations, is a violation of the Code of Conduct and is
considered, among others, serious misconduct, which is a ground for termination under Article 282 of the Labor
Code.

Kindly submit your notarized explanation to your Division Head within 48 hours from receipt of this Notice. Failure on
your part to submit a written explanation within the given period shall constitute a waiver of your right to be heard.26

When Mariano did not reply, Tanchico sent him another notice27 dated October 24, 1997, instructing him to submit
his notarized explanation otherwise the charges against him will be resolved based on the available evidence.

On November 6, 1997, Mariano wrote Tanchico:

Sir, your memorandum dated 13 October 1997 xxx is a gross violation of my constitutional right as worker and
employee to self organization xxx.

Hence, I hereby elect to exercise my right to due process, i.e., to be heard and defend myself in a formal hearing to
be set within 5 (FIVE) days from receipt of documents hereinafter requested.

Pursuant to PLDT System Practice #94-016 dated August 10, 1994 (Handling of Administrative Cases), please
furnish me a copy of formal (written) complaint filed against me, statement of witness/es and preliminary
investigations and/or report/s conducted on the aforesaid incident, if any.

My option to be heard and defend myself in a formal hearing is without prejudice to my right of recourse at a later
time which I hereby expressly reserve.28

Hence, Reynaldo Puzon, PLDT Assistant Vice-President for North Luzon, sent Mariano a notice dated November
18, 1997, informing him of the termination of his employment, thus:

xxx You asked in your letter that you be allowed to defend yourself in a formal hearing but you failed to provide a
written explanation.

In light of the demands and your failure to provide the required written explanation for the following acts:

On September 19, 1997, at around 11:50 a.m., you verbally and physically assaulted Mr. Melvyn Guillermo, a PLDT
subscriber who had just paid his PLDT bill at the company’s Laoag Business Office. After verbally abusing Mr.
Guillermo by shouting invectives in his face, you boxed and slapped him, striking his face, left shoulder and arm.
PLDT has proceeded to consider the charges against you for violation of Art. 264 of the Labor Code and for serious
misconduct.

Based on the available evidence, the written copy of which were duly sent to you, the Company finds you guilty as
charged. The Company cannot see any reason why the evidence that the statements we considered were
motivated by any purpose other than to bear witness to the truth. We find these evidence direct and positive
identification of your participation in and commission of the illegal act charged.

Your act constitutes a just cause for termination under the Labor Code which authorizes an employer to terminate
an employee for serious misconduct and which prohibits the commission of any act of violence, coercion or
intimidation, or the obstruction of free ingress and egress, during a strike (see Art. 282-A & 264, Labor Code). There

Labor II – 1
is also the additional attendant circumstances that you committed these acts during a strike that was illegally
declared and conducted. Your services with Philippine Long Distance Telephone Company are consequently
terminated effective upon receipt of this letter.29

Mariano filed a Complaint30 for illegal dismissal and damages with the LA but the latter dismissed it in a
Decision31 dated December 15, 1998. Mariano appealed to the NLRC but to no avail as the latter, in its December
27, 1999 Resolution,32 affirmed the December 15, 1998 LA Decision. In its Resolution33 of March 3, 2000, the NLRC
denied Mariano’s Motion for Reconsideration.

Mariano filed a Petition for Certiorari34 with the CA which rendered the following Decision35 on February 7, 2002:

WHEREFORE, premises considered, the petition is DISMISSED and the assailed decision and resolution are
AFFIRMED.

SO ORDERED.36

Mariano sought reconsideration of the foregoing decision but the CA denied the same in its Resolution37 of May 9,
2002.

Mariano is now before the Court in the present petition assailing the CA Decision and Resolution claiming that:

THE COURT OF APPEALS HAD DECIDED THE INSTANT DISPUTE IN A WAY NOT IN ACCORD WITH LAW
AND JURISPRUDENCE WHEN IT REFUSED TO CONSIDER THAT THE DISMISSAL OF HEREIN PETITIONER
WAS MADE IN VIOLATION OF [HIS] RIGHT TO PROCEDURAL DUE PROCESS.38

G.R. No. 163793

Ernesto Borje (Borje) was an employee of PLDT SFU Mother Exchange and a member of MKP. During the
September 1997 strike which MKP staged against PLDT, Borje took part by picketing the premises of PLDT.39

In a notice dated October 23, 1997 sent by Tanchico to Borje, the latter was accused of engaging in violent activities
during the strike. The notice read:

Please explain in writing why you should not be terminated for committing the following acts:

1. October 15, 1997, at around 8:35 a.m., you hurled a stone hitting the leg (below the knee) of Mr. Danny
N. Garcia, OPM Supervisor xxx as a result of which Mr. Garcia suffered a contusion. Attached as Annex "A"
is the incident report of Mr. Garcia; and

2. October 15, 1997, at around 8:20 p.m, you threw stones at Mr. Amelito Visico, an employee of Southland
Security Corporation of the Philippines assigned at the PLDT Exchange, San Fernando, La Union. Minutes
later or at around 8:35 p.m., you again threw stones inside PLDT premises hitting and damaging the right
side window of PLDT’s service vehicle with body no. 96-495 and plate no. UJW-359. Attached as Annex "B"
is the Affidavit of Mr. Visico.

This act is illegal and violates express provisions of the Labor Code xxx.

Additionally, as provided in the law, any worker who knowingly participates in the commission of illegal acts during a
strike may be declared to have lost his employment status.

Your illegal act has seriously prejudiced the company’s operations, is a violation of the Code of Conduct and is
considered, among others, serious misconduct, which is ground for termination under Article 282 of the Labor Code.

Kindly submit your notarized explanation to your Division Head within 48 hours from receipt of this Notice. Failure on
your part to submit a written explanation within the given period shall constitute a waiver of your right to be heard.40

Labor II – 1
Borje replied on November 7, 1997, to wit:

Sir, your memorandum dated 13 October 1997 xxx is a gross violation of my constitutional right as worker and
employee to self organization xxx.

Hence, I hereby elect to exercise my right to due process, i.e., to be heard and defend myself in a formal hearing to
be set within 5 (FIVE) days from receipt of documents hereinafter requested.

Pursuant to PLDT System Practice #94-016 dated August 10, 1994 (Handling of Administrative Cases), please
furnish me a copy of formal (written) complaint filed against me, statement of witness/es and preliminary
investigations and/or report/s conducted on the aforesaid incident, if any.

My election to exercise my right to be heard and defend myself in a formal hearing is without prejudice to my right to
submit a written explanation at a later time, which I hereby expressly reserve. 41

Puzon sent Borje a notice dated November 18, 1997 informing him of the termination of his employment, thus:

xxx You asked in your letter that you be allowed to defend yourself in a formal hearing but you failed to provide a
written explanation.

In light of the demands and your failure to provide the required written explanation for the following acts:

On October 15, 1997, at aroun 8:35 a.m., you hurled a stone hitting the leg (below the knee) of Mr. Danny Garcia,
OPM Supervisor. As a result of which Mr. Garcia suffered a contusion. On the same day, at around 8:20 p.m., you
threw stones at Mr. Amelito Visico, an employee of Southland Security Corporation of the Philippines assigned at
the PLDT Exchange, San Fernando, La Union. Minutes later or at around 8:35 p.m., you again threw stones inside
PLDT premises hitting and damaging the right side window of PLDT’s service vehicle with body no. 94-495 and
plate no. UJW-359. PLDT has proceeded to consider the charges against you for violation of Article 264 of the
Labor Code and for serious misconduct.

Based on the available evidence, the written copy of which were duly sent to you, the Company finds you guilty as
charged. The Company cannot see any reason why the evidence that the statements we considered were
motivated by any purpose other than to bear witness to the truth. We find these evidence direct and positive
identification of your participation in and commission of the illegal act charged.

Your act constitutes a just cause for termination under the Labor Code which authorizes an employer to terminate
an employee for serious misconduct and which prohibits the commission of any act of violence, coercion or
intimidation, or the obstruction of free ingress and egress, during a strike (see Art. 282-A & 264, Labor Code). There
is also the additional attendant circumstances that you committed these acts during a strike that was illegally
declared and conducted. Your services with Philippine Long Distance Telephone Company are consequently
terminated effective upon receipt of this letter.42

Borje filed a Complaint43 for illegal dismissal and damages with the LA but the latter dismissed it in a Decision dated
January 26, 2001.44 Borje appealed to the NLRC which, in a Resolution dated September 28, 2001, held:

WHEREFORE, premises considered, the decision under review is AFFIRMED and complainant’s appeal,
DISMISSED for lack of merit.

SO ORDERED. 45

Borje’s Motion for Reconsideration was denied by the NLRC in its January 7, 2002 Resolution.46

However, upon Petition for Certiorari47 filed by Borje, the CA rendered on April 12, 2002 a Decision48 the decretal
portion of which reads:

Labor II – 1
WHEREFORE, premises considered, the instant petition is GRANTED. The decision of the Labor Arbiter and the
NLRC is REVERSED and new one entered ordering the REINSTATEMENT of the Petitioner without loss of seniority
rights and other privileges and to grant him full backwages, to be computed from the time of his illegal dismissal
without qualification or deduction. Let the records of this case be REMANDED to the Labor Arbiter for appropriate
computation of backwages.

SO ORDERED.49

PLDT filed a Motion for Reconsideration but the CA denied the same in a Resolution50 dated June 1, 2004.

Petitioner PLDT is now before the Court questioning the foregoing CA Decision and Resolution on this sole ground:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDING THAT THE NLRC COMMITTED
A GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN AFFIRMING IN TOTO THE
LABOR ARBITER’S DECISION UPHOLDING THE VALIDITY OF RESPONDENT’S DISMISSAL ON THE ISSUE
OF ALLEGED LACK OF DUE PROCESS, THE SAME BEING CONTRARY TO LAW AND ESTABLISHED
JURISPRUDENCE THAT FOR CERTIORARI TO SUCCEED ABUSE OF DISCRETION MUST SATISFACTORILY
BE SHOWN TO BE "GRAVE", WHICH IS NOT SO IN THE CASE AT BAR.51[sic]

The petitions in G.R. No. 146762 and G.R. No. 153584 are partly meritorious in that the CA did not err in
upholding the validity of the dismissal of Suico, Ceniza, Dacut, and Mariano but the PLDT should be
ordered to pay said employees nominal damages pursuant to Agabon v. National Labor Relations
Commission.52

The petition in G.R. No. 163793 is meritorious in that the CA erroneously reversed the NLRC by holding the
dismissal of Borje illegal; but PLDT should also be ordered to pay Borje nominal damages.

In the three petitions, the substantive bases of the dismissal of Suico, Ceniza, Dacut, Mariano and Borje
(hereinafter collectively referred to as Suico, et al.) is not in issue. Only the procedural aspect is in issue,
specifically, whether PLDT violated the requirements of due process under the Labor Code when it
dismissed said employees without heeding their request for the conduct of a formal hearing as provided for
under PLDT Systems Practice No. 94-016 and prior to submission of their respective answers to the
charges against them.

The minimum standards of due process in all cases of termination of employment are prescribed under Article
277(b) of the Labor Code, to wit:

Art. 277. Miscellaneous Provisions.

xxxx

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal
except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this
Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the cause for termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative, if he so desires, in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. (Emphasis
supplied).

It is implemented by Rule XXIII of the Implementing Rules of Book V of the Labor Code,53 which provides:

Section 2. Standards of due process; requirements of notice.-

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

Labor II – 1
 (a) A written notice served on the employee specifying the ground or grounds for termination, and giving to
said employee reasonable opportunity within which to explain his side;

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

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

It is the view of PLDT that in the dismissal of employees for strike-related violence, it is sufficient to merely
declare the latter to have lost their employment without having to comply with any procedure for their
termination.54

PLDT is mistaken. Art. 277 (b) in relation to Art. 264 (a)55 and (e)56 recognizes the right to due process of all
workers, without distinction as to the cause of their termination.57 Where no distinction is given, none is
construed.58 Hence, the foregoing standards of due process apply to the termination of employment of Suico,
et al. even if the cause therefor was their supposed involvement in strike-related violence prohibited under
Art. 264 (a) and (e).

Moreover, the procedure for termination prescribed under Art. 277(b) and Rule XXII of the Implementing Rules of
Book V is supplemented by existing company policy. Art. 277(b) provides that the procedure for termination
prescribed therein is without prejudice to the adoption by the employer of company policy on the matter,
provided this conforms with the guidelines set by the DOLE such as Rule XXII of the Implementing Rules of
Book V. This is consistent with the established principle that employers are allowed, under the broad
concept of management prerogative, to adopt company policies that regulate all aspects of personnel
administration including the dismissal and recall of workers.59

Company policies or practices are binding on the parties.60 Some can ripen into an obligation on the part of the
employer,61 such as those which confer benefits on employees 62 or regulate the procedures and requirements for
their termination.63 Thus, in Batangas Laguna Tayabas Bus Company (BLTB) v. Court of Appeals,64 the Court held
that the employer BLTB is obliged under the Service Manual it issued to grant an erring employee the right to be
heard and defend himself, and to apply the table of penalties fixed therein.

In its Comment to the Petition in G.R. No. 146762, PLDT objected to the application to this case of the ruling in
BLTB, arguing that "xxx the more appropriate case is Mendoza v. National Labor Relations Commission,
19465 SCRA 606 [1991], where the Supreme Court ruled that company procedures for discipline do not require strict
observance as long as the essential requirements of due process had been observed xxx." But
even Mendoza favors the view that company procedure for termination should be implemented, even if not to the
letter. In fact, in said case, the employer San Miguel Corporation implemented company procedure for termination
by conducting a formal investigation, in question and answer form, against the employee Mendoza.

In the present case, PLDT does not deny the existence of a company procedure in termination cases known as
Systems Practice No. 94-016, which provides:

Effective Date

August 10, 1994

HANDLING OF ADMINISTRATIVE CASES

xxxx

1. PURPOSE

This practice describes the procedural guidelines for handling administrative cases.
Labor II – 1
2. GENERAL

2.1 Investigation of offenses or infractions of Company regulations committed by employees shall be handled by
various investigating units xxx;

xxxx

2.5 An employee under investigation for the commission of an offense or infraction shall be informed in writing of the
particular act constituting the offense or infraction imputed to him. He may answer the charges against him in writing
within a reasonable period of time (at least 48 hours but not more than 72 hours) or be afforded the opportunity to
be heard and defend himself with the assistance of his counsel or union representative, if he so desires. (Emphasis
supplied)

PLDT, however, refused to implement said policy, contending that it applies to administrative cases only and not to
strike-related cases such as the ones involving Suico, et al..66

We are unable to see the difference. As pointed out by the CA in G.R. No. 163793, while it is true that Systems
Practice No. 94-016 relates to administrative cases, PLDT failed to prove that a termination proceeding arising from
strike-related violence is not an administrative case. If by administrative case, PLDT refers to cases arising from
violation of company rules and regulations, then the proceedings against Suico, et al. were of that nature for the
notices sent to said employees accused them not just of breach of Art. 264 of the Labor Code but also of behavior
prejudicial to company operations and violative of the company code of conduct.67 The termination proceedings
against Suico, et al. were therefore administrative in nature, subject to the requirements of Systems Practice No. 94-
016.

To repeat, the requirements of due process by which to test the validity of the procedure adopted by PLDT in
dismissing Suico, et al. are those embodied in Art. 277 (b) of the Labor Code, Rule XXII of the Implementing Rules
of Book V and Systems Practice No. 94-016.

Apparently, PLDT complied with the two-notice requirement of due process. The first notices sent to Suico, et
al. set out in detail the nature and circumstances of the violations imputed to them, required them to explain their
side and expressly warned them of the possibility of their dismissal should their explanation be found wanting. The
last notices informed Suico, et al. of the decision to terminate their employment and cited the evidence upon which
the decision was based.68 These two notices would have sufficed had it not been for the existence of Systems
Practice No. 94-016. Under Systems Practice No. 94-016, PLDT granted its employee the alternative of either
filing a written answer to the charges or requesting for opportunity to be heard and defend himself with the
assistance of his counsel or union representative, if he so desires.

Suico, et al. exercised their option under Systems Practice No. 94-016 by requesting that a formal hearing
be conducted and that they be given copies of sworn statements and other pertinent documents to enable
them to prepare for the hearing.69 This option is part of their right to due process. PLDT is bound to comply
with the Systems Practice.

Yet, instead of respecting the option exercised by Suico, et al., PLDT in G.R. No. 146762 arbitrarily disregarded the
same and insisted that Suico, et al. submit their written answers first before their request for formal hearing can be
entertained.70 In G.R. No. 153584 and G.R. No. 163793, PLDT straightaway declared Mariano and Borje to have
waived the right to be heard and, based on the available evidence, decided the cases against them.71 Clearly, such
refusal by PLDT to conduct a hearing was unreasonable and arbitrary as it defeated the exercise by Suico, et al. of
an option which, by virtue of Systems Practice No. 94-016, was a component of their right to due process. The
impairment of their option constituted an impairment of their right to due process.

All told, the procedure adopted by PLDT in dismissing Suico, et al. fell short of the requirements of due process.

It should be emphasized, however, that, consistent with our ruling in Agabon,72 the procedural deficiency in the
dismissal of Suico, et al. did not affect the validity or effectivity of the dismissal as the substantive bases thereof
were never put in issue.73 Thus, the April 12, 2002 CA Decision in G.R. No. 163793 was erroneous as it declared the

Labor II – 1
dismissal of Borje illegal merely for failure of PLDT to observe due process. The CA should have affirmed the
validity of the dismissal of Borje and awarded him nominal damages for the impairment of his statutory right to due
process.

WHEREFORE, the petitions in G.R. Nos. 146762 and 153584 are PARTLY GRANTED. The assailed Decisions of
the Court of Appeals dated September 22, 2000 and February 7, 2002, respectively,
are AFFIRMED with MODIFICATION to the effect that Culver B. Suico, Teresa D. Ceniza, Ronald R. Dacut and
Benigno Mariano, Jr. are each awarded nominal damages in the amount of P30,000.00.

The petition in G.R. No. 163793 is GRANTED. The Decision dated April 12, 2002 of the Court of Appeals
is REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated January 26, 2001 and the Resolution of the
National Labor Relations Commission dated September 28, 2001 are REINSTATED with MODIFICATION that
Ernesto Borje is awarded nominal damages in the amount of P30,000.00.

Labor II – 1
 10.) [G.R. NO. 152048 : April 7, 2009]

FELIX B. PEREZ and AMANTE G. DORIA, Petitioners, v. PHILIPPINE TELEGRAPH AND

TELEPHONE COMPANY and JOSE LUIS SANTIAGO, Respondents.

DECISION

CORONA, J.:

Petitioners Felix B. Perez and Amante G. Doria were employed by respondent Philippine Telegraph
and Telephone Company (PT&T) as shipping clerk and supervisor, respectively, in PT&T's Shipping
Section, Materials Management Group.

Acting on an alleged unsigned letter regarding anomalous transactions at the Shipping Section,
respondents formed a special audit team to investigate the matter. It was discovered that the
Shipping Section jacked up the value of the freight costs for goods shipped and that the duplicates of
the shipping documents allegedly showed traces of tampering, alteration and superimposition.

On September 3, 1993, petitioners were placed on preventive suspension for 30 days for their
alleged involvement in the anomaly.1 Their suspension was extended for 15 days twice: first on
October 3, 19932 and second on October 18, 1993.3

On October 29, 1993, a memorandum with the following tenor was issued by respondents:

In line with the recommendation of the AVP-Audit as presented in his report of October 15, 1993
(copy attached) and the subsequent filing of criminal charges against the parties mentioned therein,
[Mr. Felix Perez and Mr. Amante Doria are] hereby dismissed from the service for having falsified
company documents.4 (emphasis supplied)

On November 9, 1993, petitioners filed a complaint for illegal suspension and illegal dismissal.5 They
alleged that they were dismissed on November 8, 1993, the date they received the above-mentioned
memorandum.

The labor arbiter found that the 30-day extension of petitioners' suspension and their subsequent
dismissal were both illegal. He ordered respondents to pay petitioners their salaries during their 30-
day illegal suspension, as well as to reinstate them with backwages and 13th month pay.

The National Labor Relations Commission (NLRC) reversed the decision of the labor arbiter. It ruled
that petitioners were dismissed for just cause, that they were accorded due process and that they
were illegally suspended for only 15 days (without stating the reason for the reduction of the period
of petitioners' illegal suspension).6

Petitioners appealed to the Court of Appeals (CA). In its January 29, 2002 decision,7 the CA affirmed
the NLRC decision insofar as petitioners' illegal suspension for 15 days and dismissal for just cause
were concerned. However, it found that petitioners were dismissed without due process.

Petitioners now seek a reversal of the CA decision. They contend that there was no just cause for
their dismissal, that they were not accorded due process and that they were illegally suspended for
30 days.

We rule in favor of petitioners.

Labor II – 1
Respondents Failed to Prove Just
Cause and to Observe Due Process

The CA, in upholding the NLRC's decision, reasoned that there was sufficient basis for respondents to
lose their confidence in petitioners8 for allegedly tampering with the shipping documents.
Respondents emphasized the importance of a shipping order or request, as it was the basis of their
liability to a cargo forwarder.9

We disagree.

Without undermining the importance of a shipping order or request, we find respondents' evidence
insufficient to clearly and convincingly establish the facts from which the loss of confidence
resulted.10 Other than their bare allegations and the fact that such documents came into petitioners'
hands at some point, respondents should have provided evidence of petitioners' functions, the extent
of their duties, the procedure in the handling and approval of shipping requests and the fact that no
personnel other than petitioners were involved. There was, therefore, a patent paucity of proof
connecting petitioners to the alleged tampering of shipping documents.

The alterations on the shipping documents could not reasonably be attributed to petitioners because
it was never proven that petitioners alone had control of or access to these documents. Unless duly
proved or sufficiently substantiated otherwise, impartial tribunals should not rely only on the
statement of the employer that it has lost confidence in its employee.11

Willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative is a just cause for termination.12 However, in General Bank and Trust Co. v. CA,13 we
said:

[L]oss of confidence should not be simulated. It should not be used as a subterfuge for causes which
are improper, illegal or unjustified. Loss of confidence may not be arbitrarily asserted in the face of
overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify an
earlier action taken in bad faith.

The burden of proof rests on the employer to establish that the dismissal is for cause in view of the
security of tenure that employees enjoy under the Constitution and the Labor Code. The employer's
evidence must clearly and convincingly show the facts on which the loss of confidence in the
employee may be fairly made to rest.14 It must be adequately proven by substantial
evidence.15 Respondents failed to discharge this burden.

Respondents' illegal act of dismissing petitioners was aggravated by their failure to

observe due process. To meet the requirements of due process in the dismissal of an
employee, an employer must furnish the worker with two written notices: (1) a written
notice specifying the grounds for termination and giving to said employee a reasonable
opportunity to explain his side and (2) another written notice indicating that, upon due
consideration of all circumstances, grounds have been established to justify the
employer's decision to dismiss the employee.16

Petitioners were neither apprised of the charges against them nor given a chance to defend
themselves. They were simply and arbitrarily separated from work and served notices of termination
in total disregard of their rights to due process and security of tenure. The labor arbiter and the CA
correctly found that respondents failed to comply with the two-notice requirement for terminating
employees.

Petitioners likewise contended that due process was not observed in the absence of a hearing in
which they could have explained their side and refuted the evidence against them.
Labor II – 1
There is no need for a hearing or conference. We note a marked difference in the standards of due
process to be followed as prescribed in the Labor Code and its implementing rules. The Labor Code,
on one hand, provides that an employer must provide the employee ample opportunity to be heard
and to defend himself with the assistance of his representative if he so desires:

ART. 277. Miscellaneous provisions. - x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected
against dismissal except for a just and authorized cause and without prejudice to the requirement of
notice under Article 283 of this Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of the causes for termination and
shall afford the latter ample opportunity to be heard and to defend himself with the
assistance of his representative if he so desires in accordance with company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor and Employment.
Any decision taken by the employer shall be without prejudice to the right of the worker to contest
the validity or legality of his dismissal by filing a complaint with the regional branch of the National
Labor Relations Commission. The burden of proving that the termination was for a valid or authorized
cause shall rest on the employer. (emphasis supplied)

The omnibus rules implementing the Labor Code, on the other hand, require a hearing and
conference during which the employee concerned is given the opportunity to respond to the charge,
present his evidence or rebut the evidence presented against him:17

Section 2. Security of Tenure. - x x x

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

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

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

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

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

Which one should be followed? Is a hearing (or conference) mandatory in cases involving the
dismissal of an employee? Can the apparent conflict between the law and its IRR be reconciled? cralawred

At the outset, we reaffirm the time-honored doctrine that, in case of conflict, the law prevails over
the administrative regulations implementing it.18 The authority to promulgate implementing rules
proceeds from the law itself. To be valid, a rule or regulation must conform to and be consistent with
the provisions of the enabling statute.19 As such, it cannot amend the law either by abridging or
expanding its scope.20

Article 277(b) of the Labor Code provides that, in cases of termination for a just cause, an employee
must be given "ample opportunity to be heard and to defend himself." Thus, the opportunity to be
heard afforded by law to the employee is qualified by the word "ample" which ordinarily means
"considerably more than adequate or sufficient."21 In this regard, the phrase "ample opportunity to
be heard" can be reasonably interpreted as extensive enough to cover actual hearing or conference.
Labor II – 1
To this extent, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code is in
conformity with Article 277(b).

Nonetheless, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should not
be taken to mean that holding an actual hearing or conference is a condition sine qua non for
compliance with the due process requirement in termination of employment. The test for the fair
procedure guaranteed under Article 277(b) cannot be whether there has been a formal
pretermination confrontation between the employer and the employee. The "ample opportunity to
be heard" standard is neither synonymous nor similar to a formal hearing. To confine the
employee's right to be heard to a solitary form narrows down that right. It deprives him of other
equally effective forms of adducing evidence in his defense. Certainly, such an exclusivist and
absolutist interpretation is overly restrictive. The "very nature of due process negates any concept of
inflexible procedures universally applicable to every imaginable situation." 22

The standard for the hearing requirement, ample opportunity, is couched in general language
revealing the legislative intent to give some degree of flexibility or adaptability to meet the
peculiarities of a given situation. To confine it to a single rigid proceeding such as a formal hearing
will defeat its spirit.

Significantly, Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code itself
provides that the so-called standards of due process outlined therein shall be
observed "substantially," not strictly. This is a recognition that while a formal hearing or conference
is ideal, it is not an absolute, mandatory or exclusive avenue of due process.

An employee's right to be heard in termination cases under Article 277(b) as implemented by Section
2(d), Rule I of the Implementing Rules of Book VI of the Labor Code should be interpreted in broad
strokes. It is satisfied not only by a formal face to face confrontation but by any meaningful
opportunity to controvert the charges against him and to submit evidence in support thereof.

A hearing means that a party should be given a chance to adduce his evidence to support his side of
the case and that the evidence should be taken into account in the adjudication of the
controversy.23 "To be heard" does not mean verbal argumentation alone inasmuch as one may be
heard just as effectively through written explanations, submissions or pleadings. 24 Therefore, while
the phrase "ample opportunity to be heard" may in fact include an actual hearing, it is not limited to
a formal hearing only. In other words, the existence of an actual, formal "trial-type" hearing,
although preferred, is not absolutely necessary to satisfy the employee's right to be heard.

This Court has consistently ruled that the due process requirement in cases of termination of
employment does not require an actual or formal hearing. Thus, we categorically declared
in Skipper's United Pacific, Inc. v. Maguad:25

The Labor Code does not, of course, require a formal or trial type proceeding before an
erring employee may be dismissed. (emphasis supplied)

In Autobus Workers' Union v. NLRC,26 we ruled:

The twin requirements of notice and hearing constitute the essential elements of due process. Due
process of law simply means giving opportunity to be heard before judgment is rendered. In
fact, there is no violation of due process even if no hearing was conducted, where the party
was given a chance to explain his side of the controversy. What is frowned upon is the denial
of the opportunity to be heard.

xxx

Labor II – 1
A formal trial-type hearing is not even essential to due process. It is enough that the
parties are given a fair and reasonable opportunity to explain their respective sides of the
controversy and to present supporting evidence on which a fair decision can be based. This
type of hearing is not even mandatory in cases of complaints lodged before the Labor Arbiter.
(emphasis supplied)

In Solid Development Corporation Workers Association v. Solid Development Corporation,27 we had

the occasion to state:

[W]ell-settled is the dictum that the twin requirements of notice and hearing constitute the essential
elements of due process in the dismissal of employees. It is a cardinal rule in our jurisdiction that the
employer must furnish the employee with two written notices before the termination of employment
can be effected: (1) the first apprises the employee of the particular acts or omissions for which his
dismissal is sought; and (2) the second informs the employee of the employer's decision to dismiss
him. The requirement of a hearing, on the other hand, is complied with as long as there
was an opportunity to be heard, and not necessarily that an actual hearing was conducted.

In separate infraction reports, petitioners were both apprised of the particular acts or omissions
constituting the charges against them. They were also required to submit their written explanation
within 12 hours from receipt of the reports. Yet, neither of them complied. Had they found the 12-
hour period too short, they should have requested for an extension of time. Further, notices of
termination were also sent to them informing them of the basis of their dismissal. In fine, petitioners
were given due process before they were dismissed. Even if no hearing was conducted, the
requirement of due process had been met since they were accorded a chance to explain their
side of the controversy. (emphasis supplied)

Our holding in National Semiconductor HK Distribution, Ltd. v. NLRC28 is of similar import:

That the investigations conducted by petitioner may not be

considered formal or recorded hearings or investigations is immaterial. A formal or trial
type hearing is not at all times and in all instances essential to due process, the
requirements of which are satisfied where the parties are afforded fair and reasonable opportunity to
explain their side of the controversy. It is deemed sufficient for the employer to follow the natural
sequence of notice, hearing and judgment.

The above rulings are a clear recognition that the employer may provide an employee with ample
opportunity to be heard and defend himself with the assistance of a representative or counsel in
ways other than a formal hearing. The employee can be fully afforded a chance to respond to the
charges against him, adduce his evidence or rebut the evidence against him through a wide array of
methods, verbal or written.

After receiving the first notice apprising him of the charges against him, the employee may submit a
written explanation (which may be in the form of a letter, memorandum, affidavit or position paper)
and offer evidence in support thereof, like relevant company records (such as his 201 file and daily
time records) and the sworn statements of his witnesses. For this purpose, he may prepare his
explanation personally or with the assistance of a representative or counsel. He may also ask the
employer to provide him copy of records material to his defense. His written explanation may also
include a request that a formal hearing or conference be held. In such a case, the conduct of a formal
hearing or conference becomes mandatory, just as it is where there exist substantial evidentiary
disputes29 or where company rules or practice requires an actual hearing as part of employment
pretermination procedure. To this extent, we refine the decisions we have rendered so far on this
point of law.

Labor II – 1
This interpretation of Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code
reasonably implements the "ample opportunity to be heard" standard under Article 277(b) of the
Labor Code without unduly restricting the language of the law or excessively burdening the employer.
This not only respects the power vested in the Secretary of Labor and Employment to promulgate
rules and regulations that will lay down the guidelines for the implementation of Article 277(b). More
importantly, this is faithful to the mandate of Article 4 of the Labor Code that "[a]ll doubts in the
implementation and interpretation of the provisions of [the Labor Code], including its implementing
rules and regulations shall be resolved in favor of labor."

In sum, the following are the guiding principles in connection with the hearing requirement in
dismissal cases:

(a) "ample opportunity to be heard" means any meaningful opportunity (verbal or written) given to
the employee to answer the charges against him and submit evidence in support of his defense,
whether in a hearing, conference or some other fair, just and reasonable way.

(b) a formal hearing or conference becomes mandatory only when requested by the employee in
writing or substantial evidentiary disputes exist or a company rule or practice requires it, or when
similar circumstances justify it.

(c) the "ample opportunity to be heard" standard in the Labor Code prevails over the "hearing or
conference" requirement in the implementing rules and regulations.

Petitioners Were Illegally

Suspended for 30 Days

An employee may be validly suspended by the employer for just cause provided by law. Such
suspension shall only be for a period of 30 days, after which the employee shall either be reinstated
or paid his wages during the extended period.30

In this case, petitioners contended that they were not paid during the two 15-day extensions, or a
total of 30 days, of their preventive suspension. Respondents failed to adduce evidence to the
contrary. Thus, we uphold the ruling of the labor arbiter on this point.

Where the dismissal was without just or authorized cause and there was no due process, Article 279
of the Labor Code, as amended, mandates that the employee is entitled to reinstatement without loss
of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits
or their monetary equivalent computed from the time the compensation was not paid up to the time
of actual reinstatement.31 In this case, however, reinstatement is no longer possible because of the
length of time that has passed from the date of the incident to final resolution.32 Fourteen years have
transpired from the time petitioners were wrongfully dismissed. To order reinstatement at this
juncture will no longer serve any prudent or practical purpose.33

WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals dated January
29, 2002 in CA-G.R. SP No. 50536 finding that petitioners Felix B. Perez and Amante G. Doria were
not illegally dismissed but were not accorded due process and were illegally suspended for 15 days,
is SET ASIDE. The decision of the labor arbiter dated December 27, 1995 in NLRC NCR CN. 11-
06930-93 is hereby AFFIRMED with the MODIFICATION that petitioners should be paid their
separation pay in lieu of reinstatement.

Labor II – 1
 11.) [G.R. NO. 179563 : April 30, 2009]

BACOLOD-TALISAY REALTY AND DEVELOPMENT CORPORATION, MR. MARIO GONZAGA in

his capacity as President of Bacolod Realty and Development Corporation, AND MR.
ERNESTO ALLEN LACSON, JR. in his capacity as Administrator of Bacolod Realty and
Development, Corporation, Petitioner, v. ROMEO DELA CRUZ, Respondent.

DECISION

CARPIO-MORALES, J.:

From 1980 up to 1997, Romeo de la Cruz was employed at the Hacienda Gloria, a farm owned and
managed by petitioner Bacolod-Talisay Realty and Development Corporation (BTRD). He was
dismissed on July 3, 1997 at which time he was holding the position of overseer, in charge of the
work of the laborers, checking their attendance, reporting the number of hours worked by each
laborer for payroll purposes, checking in-coming and out-going cargo, and selling and receiving
payments for seedpieces and canepoints. He was also entrusted with farm equipment and other farm
property.

He was dismissed on charges of payroll padding, selling canepoints without the knowledge and
consent of management and misappropriating the proceeds thereof, and renting out BTRD's tractor
for use in another farm and misappropriating the proceeds thereof.

Respondent thus filed on July 10, 1997 a complaint for illegal suspension and illegal dismissal before
the National Labor Relations Commission (NLRC)1 against petitioners BTRD et al.

In his Position Paper,2 respondent claimed that on June 4, 1997, he received a June 3, 1997 letter
informing him that he was being suspended for the next 30 days due to the abovementioned charges
and that there was an ongoing investigation thereof; and after 30 days his wife received a letter
dated July 3, 1997 stating that he was terminated from the service on account of the charges.

In their Position Paper, petitioners claimed that as a result of the investigation of respondent's
questioned acts, it was discovered that there were farm workers whose names were entered in the
payroll even if they did not render services and the corresponding wages were not received by them;
and while respondent committed to return the money intended for wages of those workers who
rendered no services, he did not return them.

Petitioners further claimed that a company tractor was used in another farm, rental fees of which
were not remitted to BTRD, and when confronted, respondent admitted his wrongdoings and asked
for forgiveness; and while a confrontation about the matter was held before the barangay council, no
settlement was reached.3

The Labor Arbiter dismissed respondent's complaint for lack of merit.4 And the NLRC dismissed
respondent's appeal for not being verified.5

By Decision6 of April 13, 2007, the Court of Appeals, brushing aside the lack of verification of
respondent's appeal before the NLRC, found that petitioners "did not comply with the x x x
guidelines for the dismissal of [the] employee"7 and accordingly reversed the NLRC
decision, disposing as follows:

WHEREFORE, the petition is GRANTED. Accordingly, the subject resolutions of the National Labor
Relations Commission are REVERSED and SET ASIDE. Petitioner is entitled to reinstatement

Labor II – 1
without loss of seniority rights and benefits and to payment of backwages which shall not
exceed three (3) years.8 (Emphasis in the original; underscoring supplied)

Hence, the present petition,9 petitioners faulting the Court of Appeals

x x x IN NOT DECIDING THAT PETITIONER SHOULD ONLY BE HELD LIABLE FOR NOMINAL
DAMAGES PURSUANT TO THE AGABON DOCTRINE AND OTHER SUBSEQUENT CASES BUT THE
DISMISSAL OF THE RESPONDENT SHOULD BE HELD AS VALID, THE CASE BEING ATTENDED BY JUST
CAUSE FOR TERMINATION OF EMPLOYMENT.

II

x x x BY RULING THAT AN APPEAL CAN BE HAD WITH THE NLRC EVEN THOUGH NO VERIFICATION
AND CERTIFICATION OF NON-FORUM SHOPPING WAS ATTACHED TO THE APPEAL, AND EVEN
THOUGH NO REASONS OR EXCUSE WAS ADVANCED BY THE RESPONDENT FOR THE NON-
SUBMISSION OF THE VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING.

III

x x x IN REVERSING THE DECISION OF THE NLRC AND THE LABOR ARBITER A QUO ON THE BASIS
OF MERE SPECULATION, CONJECTURE AND MERE SELF-SERVING STATEMENTS OF THE
RESPONDENT.10 (Underscoring supplied) cralawlibrary

That the Court of Appeals went on to give due course to respondent's petition despite the lack of
verification in respondent's appeal before the NLRC is not erroneous. Lack of verification is not a fatal
defect. Verification is only a formal, not a jurisdictional requirement.11 It could easily be corrected by
directing compliance therewith,12 its purpose being simply to secure an assurance that the allegations
of the petition (or complaint) have been made in good faith, or are true and correct, not merely
speculative.13

The Court of Appeals, in finding for respondent, noted that the proper procedure in dismissing him
was not observed; ergo, it ordered his "reinstatement . . . " Oddly, the appellate court did not
determine whether there was just case for respondent's dismissal. For it is only when an employee's
dismissal is not justified that reinstatement is, among other things, if still feasible, in order. This
brings the Court to pass on the merits of the case.

This Court finds that petitioners were able to establish with substantial evidence that just cause
existed for the termination of respondent's employment. Consider the following documentary
evidence they presented:

1. Excerpt from the official log book of the barangay council of Barangay Concepcion, Talisay, Negros
Occidental dated May 30, 1997 documenting the statements of Federico Serie and Jonathan Quilla
during a confrontation before the barangay counsel;14

2. Petitioner Lacson's affidavit;15

3. Joint Affidavit of petitioner Mario Gonzaga and the vice-president and secretary of BTRD;16

4. Joint affidavit of Federico Serie, Jr. (Serie), Jonathan Quilla (Quilla), Eddie Sausa (Sausa), and
Roberto Tortogo (Tortogo) claiming that they refused to sign the payroll which respondent prepared
because it indicated that they received P256 although they received only P71;17

Labor II – 1
5. Copies of payrolls for June 3-8, 1996 and June 10-15, 1996, with respondent's signature beside
the name of Federico Serie who refused to sign;18

6. Affidavit of John Trasmonte (Transmonte), in charge of keeping the payroll records and cash
disbursement of workers' wages for June 1996, claiming that he prepared the payroll based on
respondent's report and that he did not receive any return of excess wages for the cash
disbursement from the said payroll;19

7. Affidavit of Jose Racel Magbanua (Magbanua) stating that he saw respondent allowing the use of
the hacienda's tractor in another farm and receiving rent therefrom;20

8. Affidavit of Rodolfo Cañeso (Cañeso) stating that he saw respondent selling pieces of patdan
and drammy;21 and

9. Affidavit of Ma. Leonisa Gonzaga claiming shortfalls in the proceeds of the sale of drammy and
patdan as reported and remitted by respondent.22

The above-listed documentary evidence of petitioner indubitably establishes that

respondent committed payroll padding, sold canepoints without the knowledge and
consent of management and misappropriated the proceeds thereof, and rented tractor to
another farm and misappropriated the rental payments therefor. These acts constitute
willful breach by the employee of the trust reposed in him by his employer ─ a ground
for termination of employment.23

In his appeal before the NLRC, respondent noted24 that affiants Sausa and Tortogo challenged their
Joint Affidavit listed above, claiming that they did not understand its contents as they were not
translated to the dialect they understand.25 To respondent, this should have placed the Labor Arbiter
on notice that there was something irregular that should have called for him to order, but he did not,
the conduct of clarificatory hearings.26

Respondent's position does not persuade. Sausa's and Tortogo's challenge to their Joint Affidavit
does not affect the totality of petitioners' evidence, as affiants Serie and Quilla attested to the same
matter-subject of Sausa and Tortogo's questioned Joint Affidavit. Besides, as reflected above, other
affidavits and pieces of documentary evidence in support of petitioners' position were presented.
Respondent had been furnished petitioners' Position Paper to which copies of these affidavits and
other documentary evidence against him were attached.27 Thus, respondent had the opportunity to
file a counter-position paper and refute the evidence against him, but he did not.

The Court of Appeals correctly held though that petitioners did not comply with the proper procedure
in dismissing respondent. In other words, petitioners failed to afford respondent due process by
failing to comply with the twin notice requirement in dismissing him, viz: 1) a first notice to apprise
him of his fault, and 2) a second notice to him that his employment is being terminated. ςηαñrοblεš νιr⠀ υαl lαω lιbrαrÿ

The letter dated June 3, 1997 sent to respondent was a letter of suspension. It did not
comply with the required first notice,28 the purpose of which is to apprise the employee of
the cause for termination and to give him reasonable opportunity to explain his side.29

The confrontation before the barangay council did not constitute the first notice ─ to give the
employee ample opportunity to be heard with the assistance of counsel, if he so desires.30 Hearings
before the barangay council do not afford the employee ample opportunity to be
represented by counsel if he so desires because Section 415 of the Local Government Code
mandates that "[i]n all katarungang pambarangay proceedings, the parties must appear in person
without the assistance of counsel or his representatives, except for minors and incompetents who
may be assisted by their next-of-kin who are not lawyers."
Labor II – 1
The requirement of giving respondent the first notice not having been complied with, discussions of
whether the second notice was complied with is rendered unnecessary.

In fine, while the dismissal of respondent was for a just cause, the procedure in effecting the same
was not observed.

WHEREFORE, the assailed Decision of the appellate court is VACATED and another is rendered
ORDERING petitioners to, in light of the foregoing discussions, PAY respondent the sum of P30,000
as nominal damages.

Labor II – 1
 12.) [G.R. No. 185335 : June 13, 2012]

PRUDENTIAL GUARANTEE AND ASSURANCE EMPLOYEE LABOR UNION AND SANDY T. VALLOTA,
PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION, PRUDENTIAL GUARANTEE AND
ASSURANCE INC., AND/OR JOCELYN RETIZOS, RESPONDENTS.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 filed by petitioners Prudential Guarantee and Assurance
Employee Labor Union (Union) and Sandy T. Vallota (Vallota) seeking to set aside the September 16, 2008
Decision1 and November 10, 2008 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 102699. cralaw

The Facts

Vallota commenced his employment with respondent Prudential Guarantee and Assurance, Inc. (PGAI) on May 16,
1995 as a Junior Programmer assigned to the Electronic Data Processing (EDP)  Department. He reported directly to
Gerald Dy Victory, then head of the EDP, until his replacement by respondent Jocelyn Retizos (Retizos) sometime in
1997.

In August of 2005, Vallota was elected to the Board of Directors of the Union.

On November 11, 2005, PGAI’s Human Resource Manager, Atty. Joaquin R. Rillo (Atty. Rillo), invited Union President,
Mike Apostol (Apostol) to his office. Atty. Rillo informed Apostol that PGAI was going to conduct an on-the-spot
security check in the Information and Technology (IT) Department. Atty. Rillo also requested that Union
representatives witness the inspection to which Apostol agreed.

The inspection team proceeded to the IT Department, and the EDP head, through PGAI network administrator Angelo
Gutierrez (Gutierrez), initiated the spot check of IT Department computers, beginning with the one assigned to
Vallota. After exploring the contents of all the folders and subfolders in the “My Documents” folder,
Gutierrez apparently did not find anything unusual with Vallota’s computer and said “Wala naman, saan
dito?” Retizos insisted, “Nandyan yan,” and took over the inspection until she found a folder
named “MAA.” She then exclaimed, “Heto oh! Ano to? Bakit may MAA dito?” Retizos asked Vallota, “Are
you working for MAA?” Vallota replied, “Hindi po, MAA mutual life po yan na makikita po sa
internet.” Gutierrez saved a copy of the contents of the MAA folder in a floppy disk.3

Sensing that Vallota was being singled out, Apostol insisted that all the computers in the IT Department, including
that of Retizos, be also subjected to a spot security check. Later, at Retizos’ office, and in the presence of Atty. Rillo,
Vallota was informed that Retizos and Atty. Rillo would print the files found in his computer under the
folder “MAA.” Vallota did not object. After the files were printed, Vallota and the Union Secretary were asked to sign
each page of the printout. Vallota, however, was not given a copy of the printed file.

On November 14, 2005, Vallota received a memorandum4 directing him to explain within 72 hours why highly
confidential files were stored in his computer. The case was assigned Reference No. AC-05-02. The same
memorandum also informed him that he was being placed under preventive suspension for 30 days effective upon
receipt of the said notice.  A second memorandum,5 also dated November 14, 2005, notified Vallota of the extension
of his preventive suspension for another 30 days, in view of the fact that the management needed more time to
evaluate the administrative case against him.

Vallota responded in writing on November 21, 2005.6 Three days later, on November 24, 2005, PGAI sent him
another memorandum7 requesting further details on some of the matters he raised in his response. In a letter8 dated
December 6, 2005, Vallota requested a conference, to be attended by a Union representative and counsel. In
reply, PGAI sent Vallota another memorandum9 dated December 7, 2005, which, among others, set a new deadline for
Vallota to submit his reply and evidence in his defense.

In compliance with the deadline set, Vallota submitted his reply-memorandum10 dated December 12, 2005, outlining
his response to the charges.

Meanwhile, the Union sent a letter11 to PGAI President Philip K. Rico (Rico) requesting that a grievance committee be
convened and that the contents of the computers of other IT personnel be similarly produced. The request for the
convening of a grievance committee was ignored. On December 21, 2005, Vallota was given a notice of
termination of his employment effective January 10, 2006 on the ground of loss of trust and confidence. The

Labor II – 1
decision (AC-05-02) was embodied in a memorandum12 dated December 21, 2005.

Thus, the petitioners filed a complaint for illegal dismissal with claims for full backwages, moral and exemplary
damages, and attorney’s fees. The case was docketed as NLRC-NCR Case No. 00-01-00387-06.

On March 31, 2006, Labor Arbiter Aliman D. Mangandog (LA) rendered a decision13 in favor of the petitioners, the
dispositive portion of which reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered, declaring the dismissal of
complainant Vallota illegal and holding the respondents for the following:

1.  to reinstate complainant Vallota to his former position without loss of benefits and seniority rights.
2. to pay complainant Vallota full backwages from the time of his dismissal until actual reinstatement
partially computed as of this date amount[ing] to P60,856.00 (P18,400/mo. x 3 mos. & 8 days).
3. to pay complainant’s attorney’s fee equivalent to 10% of the total monetary award.

SO ORDERED.14

The LA held that PGAI failed to meet its burden of evidence, and the conflicting claims of the parties were resolved in
favor of Vallota for failure of PGAI to adduce substantial evidence to support its claim.  The LA further held that the
dismissal was not commensurate to the misconduct complained of, especially considering that it was Vallota’s first
offense.15

On the matter of the blank gate pass stored in Vallota’s computer, the LA found as satisfactory his explanation that
Joseph Tolentino (Tolentino), a PGAI employee, requested him, from time to time, to print a gate pass whenever he
had to bring tools outside of the company premises. The LA cited Vallota’s argument that “it is quite odd [that]
despite the fact that the gate pass form was admitted by the respondents in [their] Reply as their exclusive property,
complainant’s possession of the same was not considered x x x Possession of Company property without
authorization.”16

The LA further found that the respondents were not able to establish that Vallota used company property for his
personal benefit. Nothing on record could show that he made an attempt to defraud his employer. With regard to the
charge that, without authorization, he misused or removed company documents, the LA opined that if this were true,
the respondents should have conducted a thorough investigation to determine the liable persons.17

Finally, the LA ruled that Vallota was denied due process since the respondents refused to conduct a hearing, despite
Vallota’s request, to thresh out the matters raised by him in his memoranda.18

The respondents filed their Memorandum of Appeal19 dated May 19, 2006. The case was docketed as NLRC NCR CA
No. 049107-06(7).

On June 30, 2006, the National Labor Relations Commission (NLRC)  issued its Resolution20 dismissing the appeal on
the ground that the respondents failed to submit a certificate of non-forum shopping in accordance with the Rules of
Procedure of the NLRC.

The respondents filed their Motion for Reconsideration21 dated July 17, 2006,22 which the Union opposed.

On October 31, 2007, the NLRC granted the respondents’ motion for reconsideration and reversed and set aside the
decision of the LA.23 The dispositive portion of the resolution reads:

WHEREFORE, premises considered, respondents’ Motion for Reconsideration from the Resolution of June 30, 2006 is
GRANTED. The appealed decision is hereby REVERSED and SET ASIDE. However, respondent is hereby ordered to pay
complainant financial assistance equivalent to one-half (1/2) month pay for every year of service or xx the amount of
ninety two thousand pesos (?92,000.00.)

P18,400 x 10 yrs. = P92,000.00

2

SO ORDERED.

The NLRC reasoned out that the respondents had submitted substantial and sufficient evidence to prove that there
existed grounds for the PGAI to lose trust and confidence in Vallota. The NLRC also found grave abuse of discretion on
Labor II – 1
the part of the LA to disregard the affidavits of Tolentino, Retizos and Allan Unson, as the LA himself did not set a
hearing for the purpose of cross-examining the said witnesses or verifying the statements made in their affidavits. As
reflected in the decretal portion, although the NLRC ruled that the dismissal was valid, it still directed the respondents
to grant Vallota financial assistance of one-half (1/2) month pay for every year of his ten (10) years of service.24

The petitioners moved for a reconsideration25 of the decision, but their motion was denied in a resolution26 dated
December 28, 2007.

Dejected, the petitioners filed a petition for certiorari27 with the CA which was docketed as CA-G.R. SP. No. 102699.
On September 16, 2008, the CA denied the petition for lack of merit, and sustained the award of the NLRC.

The petitioners’ motion for reconsideration was denied in a resolution dated November 10, 2008.

Hence, this petition.

ISSUES

The petitioners raise the following issues:

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
GIVING LIBERALITY TO PRIVATE RESPONDENTS['] FOUR BLATANT VIOLATIONS OF THE NLRC RULES OF
PROCEDURE.

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS GROSSLY MISAPPRECIATED THE FACT THAT NO
SUBSTANTIAL EVIDENCE EXIST[S] TO JUSTIFY THE DISMISSAL OF PETITIONER VALLOTA. 28

RULING OF THE COURT

First, the allegation of grave abuse of discretion is misplaced, as this is an issue appropriate for a petition for certiorari
under Rule 65, not a petition for review on certiorari under Rule 45. There is no question that grave abuse of
discretion or errors of jurisdiction may be corrected only by the special civil action of certiorari. Such special remedy
does not avail in instances of error of judgment which can be corrected by appeal or by a petition for review. Because
the petitioners availed of the remedy under Rule 45, recourse to Rule 65 cannot be allowed either as an add-on or as
a substitute for appeal.29

Regarding illegal dismissal, the core issues to be resolved here are: (1) whether Vallota was validly dismissed on
the ground of loss of trust and confidence; and (2) whether the requirements of procedural due process
for termination were observed.

Whether the petitioner was validly

dismissed on the ground of loss of
trust and confidence

The Court’s discussion in Mabeza v. National Labor Relations Commission30 is instructive:

Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for
terminating their employees.  Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given the
seal of approval by this Court, could readily reduce to barren form the words of the constitutional guarantee of
security of tenure. Having this in mind, loss of confidence should ideally apply only to cases involving employees
occupying positions of trust and confidence or to those situations where the employee is routinely charged with the
care and custody of the employer's money or property.  To the first class belong managerial employees, i.e., those
vested with the powers or prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees or effectively recommend such managerial actions; and to
the second class belong cashiers, auditors, property custodians, etc., or those who, in the normal and routine
exercise of their functions, regularly handle significant amounts of money or property.  Evidently, an ordinary
chambermaid who has to sign out for linen and other hotel property from the property custodian each day and who
has to account for each and every towel or bedsheet utilized by the hotel's guests at the end of her shift would not fall
under any of these two classes of employees for which loss of confidence, if ably supported by evidence, would
normally apply.  Illustrating this distinction, this Court, in Marina Port Services, Inc. vs. NLRC, has stated that:

Labor II – 1
To be sure, every employee must enjoy some degree of trust and confidence from the employer as that is one reason
why he was employed in the first place. One certainly does not employ a person he distrusts.  Indeed, even the lowly
janitor must enjoy that trust and confidence in some measure if only because he is the one who opens the office in
the morning and closes it at night and in this sense is entrusted with the care or protection of the employer's
property.  The keys he holds are the symbol of that trust and confidence.

By the same token, the security guard must also be considered as enjoying the trust and confidence of his employer,
whose property he is safeguarding.  Like the janitor, he has access to this property.  He too, is charged with its care
and protection.

Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that property. 
The employer's trust and confidence in him is limited to that ministerial function.  He is not entrusted, in the Labor
Arbiter's words, 'with the duties of safekeeping and safeguarding company policies, management instructions, and
company secrets such as operation devices.'  He is not privy to these confidential matters, which are shared only in
the higher echelons of management. It is the persons on such levels who, because they discharge these sensitive
duties, may be considered holding positions of trust and confidence.  The security guard does not belong in such
category.

More importantly, we have repeatedly held that loss of confidence should not be simulated in order to justify what
would otherwise be, under the provisions of law, an illegal dismissal.  "It should not be used as a subterfuge for
causes which are illegal, improper and unjustified. It must be genuine, not a mere afterthought to justify an earlier
action taken in bad faith."31

(Citations omitted. Emphases supplied.)

In Bristol Myers Squibb (Phils.), Inc. v. Baban,32 the Court discussed the requisites for a valid dismissal on the ground
of loss of trust and confidence:

It is clear that Article 282(c) of the Labor Code allows an employer to terminate the services of an employee for loss
of trust and confidence.  The right of employers to dismiss employees by reason of loss of trust and confidence is well
established in jurisprudence.

The first requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned
must be one holding a position of trust and confidence.  Verily, We must first determine if respondent holds such a
position.

There are two (2) classes of positions of trust. The first class consists of managerial employees.  They are defined as
those vested with the powers or prerogatives to lay down management policies and to hire, transfer suspend, lay-off,
recall, discharge, assign or discipline employees or effectively recommend such managerial actions.  The second class
consists of cashiers, auditors, property custodians, etc.  They are defined as those who in the normal and routine
exercise of their functions, regularly handle significant amounts of money or property.

xxx

The second requisite is that there must be an act that would justify the loss of trust and confidence. Loss of trust
and confidence to be a valid cause for dismissal must be based on a willful breach of trust and founded on clearly
established facts.  The basis for the dismissal must be clearly and convincingly established but proof beyond
reasonable doubt is not necessary.33

(Citations omitted. Emphases supplied.)

Thus, the first question to be addressed is whether Vallota held a position of trust and confidence. In previous cases,
the following positions were classified under the second class of holders of positions of trust and confidence: a
pharmaceutical company’s district manager employed to handle pharmaceutical products for distribution to medical
practitioners and sale to drug outlets,34 a bank manager,35 and an employee tasked with purchasing supplies and
equipment.36 The position of a contract claims assistant tasked with monitoring enforcement of contracts involving
large sums of money was also classified to be analogous to this second class of holders of positions of trust and
confidence.37

Vallota was employed by PGAI as a Junior Programmer assigned to the EDP Department. His functions included the
following:

-     Installation of PGAI System38 on all designated branches

Labor II – 1
-     Development of internal programs as required by the organization

-     Handling and maintenance of all programs as per advise.

-     Conduct[s] operation training on PGAI systems on all PGAI branches

-     Generates and handles renewal list of all applicable lines.

-     Generates and produces renewal notice of all lines as required.

-     Generates paid premium production of all agents.

-     Generates outstanding production reports of all agents.

-     Generates report on top account executive per I.T. supervisor instruction.

-     Generates and handle[s] data on top agents per AE premium production.

-     Handles and maintains uploading system, accounting data per advise, account receivable system, motor car
policy system, claims motor car system, check disbursement system, cash call system, R.I. outgoing and incoming
system, facultative systems.

-     All other task[s] as may be assigned to him from time to time.39

Based on the standards set by previous jurisprudence, Vallota’s position as Junior Programmer is
analogous to the second class of positions of trust and confidence. Though he did not physically handle
money or property, he became privy to confidential data or information by the nature of his functions. At a
time when the most sensitive of information is found not printed on paper but stored on hard drives and servers, an
employee who handles or has access to data in electronic form naturally becomes the unwilling recipient of
confidential information.

Having addressed the nature of his position, the next question is whether the act complained of justified the loss of
trust and confidence of Vallota’s employer so as to constitute a valid cause for dismissal. It must, thus, be determined
whether the alleged basis for dismissal was based on clearly established facts.

The act alleged to have caused the loss of trust and confidence of PGAI in Vallota was the presence in his computer’s
hard drive of a folder named “MAA” allegedly containing files with information on MAA Mutual Life Philippines, a
domestic corporation selling life insurance policies to the buying public, and files relating to PGAI’s internal affairs:

1. MAA Mutualife Philippines, Inc. prospectus consisting of five (5) pages

2. MAA Mutualife Philippines, Inc. corporate profile consisting of six (6) pages
3. PGAI client’s (sic) questionnaire consisting of five (5) pages
4. PGAI values and strategy
5.  PGAI Client Servising (sic): Proposed Service Standard consisting of seven (7) pages
6. PGAI Marketing Department Division consisting of twenty (20) pages

6.1 Marketing Department present set-up

6.2 Present Table of Organization
6.3 How is the market evolving? How does it affect PGAI?
6.4 The strategy of change
6.5 Segmentation
6.6 Proposed Table of Organization
6.7 Proposed PGA Super Branch

6.7.a Objectives
6.7.b Accounts to be service

Labor II – 1
 6.8 Proposed Chart for the Retail Division
          6.8.a Dual Objective
6.9 Marketing Administration
6.10 Analysis of Statistics
6.11 Proposed Corporate Accounts Servicing Division

6.11.a Facts
6.11.b 2003 and 2004 Dealership Production Statistics
6.11.c  2003 -2004 Budget Analysis

7. PGAI Marketing Division: An Analysis & Proposed Solution consisting of seven (7) pages
8. PGAI Customer Service Commitment consisting of six (6) pages
9.  PGAI Gate Pass Form40

Following such discovery, Vallota was charged with the following violations of Company Rules on Company Property:

1. Possession of company property without authorization;

2. Securing or obtaining Prudential materials or supplies fraudulently;
3. Using Company equipment, property, or material to perform or create something for personal gain or
purpose; and
4. Misuse or removal from company premises without proper authorization of Prudential records or
confidential information of any nature.41

Vallota and the Union argue, among others, that (1) the respondents failed to prove by substantial evidence that
Vallota’s position did not allow him to access confidential information and that the data found in his computer had
been used for his personal gain; (2) Vallota did not deliberately get the files from other departments; instead, such
files were acquired in the process of fixing diskettes and printing information as requested by his co-employees; (3)
no evidence was presented to prove that Vallota sold or was about to sell corporate documents to MAA Mutual Life
Corporation or to any company; and (4) the respondents’ refusal to convene a grievance machinery was a clear abuse
of management prerogative.42

The respondents, on the other hand, counter that Vallota admitted ownership of the files found in his computer. They
also argue that it was the Data Center Technical Support Staff, and not the Junior Programmer, who handled
recovery/fixing/printing of files of the nature of those found in Vallota’s possession; that it was a remote possibility
that the Junior Programmer would be directly requested to assist employees, since the Methods Analyst would have
been the designee for such task; that Vallota’s functions as Junior Programmer did not include matters relating to web
development; that under standard IT procedure and company practice, the employees who requested assistance from
the IT Department were required to fill up a Job Request Form (JRF), which was then submitted for prior approval by
the IT Head; that Retizos, as IT Head, could not recall signing or approving any request pertaining to the recovered
PGAI files; that Vallota could not produce a single JRF when he was asked to do so and explained the lack of JRFs by
stating that such file repairs, file recovery, or printing jobs were merely “little favors” and that such were considered
as company “practice”; and that he, however, refused to reveal the names of the employees who had sought
assistance in the fixing/printing/recovery of the PGAI files.43

The respondents aver that Vallota also had in his computer the PGAI Gate Pass Form template,44 a company property
that could not be copied, stored, or reproduced without company permission. They also claim that Vallota was guilty
of using company equipment, property or material to perform or create something for personal gain or purpose. MAA
files, alleged to be highly confidential and sensitive, were found in Vallota’s computer which he explained were
downloaded from the MAA website outside of company premises merely for information. Upon searching the MAA
website, however, they (respondents) did not find any of the said files. They also found that the MAA website was
accessible only to certain users and was not open to the public as claimed by Vallota. Given all of these, the
respondents concluded that Vallota’s possession of the PGAI and MAA files appeared to be part of a plan to take
Labor II – 1
advantage of the said documents for personal gain.45

While the law and this Court recognize the right of an employer to dismiss an employee based on loss of trust and
confidence, the evidence of the employer must clearly and convincingly establish the facts upon which the loss of trust
and confidence in the employee is based.46

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.47 It must rest on substantial grounds and not on the employer’s arbitrariness, whims,
caprices or suspicion; otherwise, the employee would remain eternally at the mercy of the employer.48 Further, in
order to constitute a just cause for dismissal, the act complained of must be work-related and show that the
employee concerned is unfit to continue working for the employer. 49 Such ground for dismissal has never been
intended to afford an occasion for abuse because of its subjective nature.50

It must also be remembered that in illegal dismissal cases like the one at bench, the burden of proof is upon the
employer to show that the employee’s termination from service is for a just and valid cause.51  The employer’s case
succeeds or fails on the strength of its evidence and not the weakness of that adduced by the employee,52 in keeping
with the principle that the scales of justice should be tilted in favor of the latter in case of doubt in the evidence
presented by them.53 Often described as more than a mere scintilla,54 the quantum of proof is substantial evidence
which is understood as such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion, even if other equally reasonable minds might conceivably opine otherwise.55  Failure of the employer to
discharge the foregoing onus would mean that the dismissal is not justified and, therefore, illegal.56

In this case, there was no other evidence presented to prove fraud in the manner of securing or obtaining the files
found in Vallota’s computer. In fact, aside from the presence of these files in Vallota’s hard drive, there was no other
evidence to prove any gross misconduct on his part. There was no proof either that the presence of such files was part
of an attempt to defraud his employer or to use the files for a purpose other than that for which they were intended.
If anything, the presence of the files reveals some degree of carelessness or neglect in his failure to delete them, but
it is an extremely farfetched conclusion bordering on paranoia to state that it is part of a larger conspiracy involving
corporate espionage.

Moreover, contrary to the respondents’ allegations, the MAA files found in Vallota’s computer, the prospectus and
corporate profile, are not sensitive corporate documents. These are documents routinely made available to the public,
and serve as means to inform the public about the company and to disseminate information about the products it sells
or the services it provides, in order that potential clients may make a sound and informed decision whether or not to
purchase or avail of such goods and services.

If anything, the presence of the files would merely merit the development of some suspicion on the part of the
employer, but should not amount to a loss of trust and confidence such as to justify the termination of  his
employment. Such act is not of the same class, degree or gravity as the acts that have been held to be of such
character. While Vallota’s act or omission may have been done carelessly, it falls short of the standard required for
termination of employment. It does not manifest either that the employee concerned is unfit to continue working for
his employer.

Termination of employment is a drastic measure reserved for the most serious of offenses. When the act complained
of is not so grave as to result in a complete loss of trust and confidence, a lower penalty such as censure, warning, or
even suspension, would be more circumspect. This is of particular significance here where during Vallota’s ten years of
service to PGAI, not once was he ever warned or reprimanded for such printing services.

Whether the procedural due process

requirements for termination were
observed

The petitioners allege that Vallota was denied due process of law, as the records of the case clearly show that his
request for an administrative hearing was denied without reason by PGAI. Citing Rule 1, Section 2(d) of the
Implementing Rules of Book VI of the Labor Code, the petitioners argue that a hearing or conference must be
conducted to afford the employee an opportunity to respond to the charge, and to present or rebut evidence
presented against him. The petitioners are of the position that the unjustified refusal of PGAI to conduct a hearing
violated the said provision of the Rules implementing the Labor Code, as well as Vallota’s right to defend himself
before an impartial investigating body.57

The Court explained the concept of the opportunity to be heard in the case of Perez v. Philippine Telegraph and
Telephone Company:58

Labor II – 1
After receiving the first notice apprising him of the charges against him, the employee may submit a written
explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and offer evidence in
support thereof, like relevant company records (such as his 201 file and daily time records) and the sworn statements
of his witnesses. For this purpose, he may prepare his explanation personally or with the assistance of a
representative or counsel. He may also ask the employer to provide him copy of records material to his defense. His
written explanation may also include a request that a formal hearing or conference be held. In such a case, the
conduct of a formal hearing or conference becomes mandatory, just as it is where there exist substantial evidentiary
disputes[59 or where company rules or practice requires an actual hearing as part of employment pretermination
procedure. To this extent, we refine the decisions we have rendered so far on this point of law.

This interpretation of Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code reasonably
implements the “ample opportunity to be heard” standard under Article 277(b) of the Labor Code without unduly
restricting the language of the law or excessively burdening the employer. This not only respects the power vested in
the Secretary of Labor and Employment to promulgate rules and regulations that will lay down the guidelines for the
implementation of Article 277(b). More importantly, this is faithful to the mandate of Article 4 of the Labor Code that
“[a]ll doubts in the implementation and interpretation of the provisions of [the Labor Code], including its
implementing rules and regulations shall be resolved in favor of labor.”

In sum, the following are the guiding principles in connection with the hearing requirement in dismissal cases:

(a) “ample opportunity to be heard” means any meaningful opportunity (verbal or written) given to the employee to
answer the charges against him and submit evidence in support of his defense, whether in a hearing, conference or
some other fair, just and reasonable way.

(b)   a formal hearing or conference becomes mandatory only when requested by the employee in writing or
substantial evidentiary disputes exist or a company rule or practice requires it, or when similar circumstances justify
it.

(c)   the “ample opportunity to be heard” standard in the Labor Code prevails over the “hearing or conference”
requirement in the implementing rules and regulations.

(Emphasis original. Underscoring supplied.)60

In this case, the two-notice requirement was complied with. By the petitioners’ own admission, PGAI issued to Vallota
a written Notice of Charges & Preventive Suspension (Ref. No. AC-05-02) dated November 14, 2005. After an
exchange of memoranda, PGAI then informed Vallota of his dismissal in its decision dated December 21, 2005.

Given, however, that the petitioners expressly requested a conference or a convening of a grievance
committee, following the Court’s ruling in the Perez case, which was later cited in the recent case
of Lopez v. Alturas Group of Companies,61 such formal hearing became mandatory. After PGAI failed to
affirmatively respond to such request, it follows that the hearing requirement was not complied with and,
therefore, Vallota was denied his right to procedural due process.

In light of the above discussion, Vallota is entitled to reinstatement and backwages, reckoned from the
date he was illegally dismissed until the finality of this decision in accordance with jurisprudence.62

In view of the strained relations between Vallota and PGAI, however, it is not in the best interest of the parties, nor is
it advisable or practical to order reinstatement. Where reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service should be awarded as an alternative.  It must be
stressed, however, that an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement, which
are separate and distinct. In Golden Ace Builders v. Tagle,63 it was written:

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two
reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation pay is granted. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and
backwages.

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up to
the date of actual reinstatement. Where reinstatement is no longer viable as an option, separation pay
equivalent to one (1) month salary for every year of service should be awarded as an alternative. The
payment of separation pay is in addition to payment of backwages. (emphasis, italics and underscoring
supplied)

Labor II – 1
Velasco v. National Labor Relations Commission, emphasizes:

The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no
longer practical or in the best interest of the parties. Separation pay in lieu of reinstatement may likewise be
awarded if the employee decides not to be reinstated. (Emphasis in the original; italics supplied)

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. On one hand, such payment liberates the
employee from what could be a highly oppressive work environment. On the other hand, it releases the employer
from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust.64

(Emphasis, underscoring and comments in the original.)

This has been the consistent ruling in the award of separation pay to illegally dismissed employees in lieu of
reinstatement, in addition to the award of backwages.

Finally, Vallota, having been compelled to litigate in order to seek redress, is entitled, as he had prayed early on, to
the award of attorney’s fees equivalent to 10% of the total monetary award. cralaw

WHEREFORE, the petition is GRANTED. The September 16, 2008 Decision and November 10, 2008 Resolution of the
Court of Appeals in CA-G.R. SP No. 102699 are REVERSED and SET ASIDE, and the Decision of the Labor Arbiter
dated March 31, 2006 is REINSTATED but MODIFIED to the effect that, in addition to backwages, petitioner Sandy
T. Vallota is entitled to be awarded separation pay equivalent to one (1) month salary for every year of service in lieu
of reinstatement.

Labor II – 1
13.) G.R. No. 193676               June 20, 2012

COSMOS BOTTLING CORP., Petitioner,

vs.
WILSON FERMIN, Respondent.

x-----------------------x

G.R. No. 194303

WILSON B. FERMIN, Petitioner,
vs.
COSMOS BOTTLING CORPORATION and CECILIA BAUTISTA, Respondents.

DECISION

SERENO, J.:

Before this Court are two consolidated cases, namely: (1) Petition for Review dated 26 October 2010 (G.R. No.
193676) and (2) Petition for Review on Certiorari under Rule 45 dated 14 October 2010 (G.R. No. 194303). Both 1 

Petitions assail the Decision dated 20 May 2009 and Resolution dated 8 September 2010 issued by the Court of
2  3 

Appeals (CA). The dispositive portion of the Decision reads:

WHEREFORE, the August 31, 2005 Decision and October 21, 2005 Resolution of the National Labor Relations
Commission in NLRC NCR CA No. 043301-05 are hereby SET ASIDE. Respondent Cosmos Bottling Corporation is,
in light of the foregoing discussions, hereby ORDERED to pay Petitioner his full retirement benefits.

There being no data from which this Court can properly assess Petitioner’s full retirement benefits, the case is, thus,
remanded to the Labor Arbiter only for that purpose.

SO ORDERED.

Wilson B. Fermin (Fermin) was a forklift operator at Cosmos Bottling Corporation (COSMOS), where he started his
employment on 27 August 1976. On 16 December 2002, he was accused of stealing the cellphone of his fellow
4 

employee, Luis Braga (Braga). Fermin was then given a Show Cause Memorandum, requiring him to explain why
5 

the cellphone was found inside his locker. In compliance therewith, he submitted an affidavit the following day,
6 

explaining that he only hid the phone as a practical joke and had every intention of returning it to Braga.
7

On 21 December 2002, Braga executed a handwritten narration of events stating the following: 8

(a) At around 6:00 a.m. on 16 December 2002, he was changing his clothes inside the locker room, with
Fermin as the only other person present.

(b) Braga went out of the locker room and inadvertently left his cellphone by the chair. Fermin was left inside
the room.

(c) After 10 minutes, Braga went back to the locker room to retrieve his cellphone, but it was already gone.

(d) Braga asked if Fermin saw the cellphone, but the latter denied noticing it.

(e) Braga reported the incident to the security guard, who thereafter conducted an inspection of all the
lockers.

(f) The security guard found the cellphone inside Fermin’s locker.
Labor II – 1
 (g) Later that afternoon, Fermin talked to Braga to ask for forgiveness. The latter pardoned the former and
asked him not to do the same to their colleagues.

After conducting an investigation, COSMOS found Fermin guilty of stealing Braga’s phone in violation of company
rules and regulations. Consequently, on 2 October 2003, the company terminated Fermin from employment after
9  10 

27 years of service, effective on 6 October 2003.

11  12

Following the dismissal of Fermin from employment, Braga executed an affidavit, which stated the belief that the
former had merely pulled a prank without any intention of stealing the cellphone, and withdrew from COSMOS his
complaint against Fermin. 13

Meanwhile, Fermin filed a Complaint for Illegal Dismissal, which the Labor Arbiter (LA) dismissed for lack of merit
14 

on the ground that the act of taking a fellow employee’s cellphone amounted to gross misconduct. Further, the LA
15 

likewise took into consideration Fermin’s other infractions, namely: (a) committing acts of disrespect to a superior
officer, and (b) sleeping on duty and abandonment of duty. 16

Fermin filed an appeal with the National Labor Relations Commission (NLRC), which affirmed the ruling of the
LA and denied Fermin’s subsequent Motion for Reconsideration.
17  18

Thereafter, Fermin filed a Petition for Certiorari with the Court of Appeals (CA), which reversed the rulings of the LA
19 

and the NLRC and awarded him his full retirement benefits. Although the CA accorded with finality the factual
20 

findings of the lower tribunals as regards Fermin’s commission of theft, it nevertheless held that the penalty of
dismissal from service was improper on the ground that the said violation did not amount to serious misconduct or
wilful disobedience, to wit:

[COSMOS], on which the onus of proving lawful cause in sustaining the dismissal of [Fermin] lies, failed to prove
that the latter’s misconduct was induced by a perverse and wrongful intent, especially in the light of Braga’s
Sinumpaang Salaysay which corroborated [Fermin’s] claim that [Fermin] was merely playing a prank when he hid
Braga’s cellular phone. Parenthetically, the labor courts dismissed Braga’s affidavit of desistance as a mere
afterthought because the same was executed only after [Fermin] had been terminated.

It must be pointed out, however, that in labor cases, in which technical rules of procedure are not to be strictly
applied if the result would be detrimental to the workingman, an affidavit of desistance gains added importance in
the absence of any evidence on record explicitly showing that the dismissed employee committed the act which
caused the dismissal. While We cannot completely exculpate [Fermin] from his violation at this point, We cannot,
however, turn a blind eye and disregard Braga’s recantation altogether. Braga’s recantation all the more bolsters
Our conclusion that [Fermin’s] violation does not amount to or borders on "serious or willful" misconduct or willful
disobedience to call for his dismissal.
1âwphi1

Morever, [COSMOS] failed to prove any resultant material damage or prejudice on their part as a consequence of
[Fermin’s] questioned act. To begin with, the cellular phone subject of the stealth belonged, not to [COSMOS], but to
Braga. Secondly, the said phone was returned to Braga in due time. Under the circumstances, a penalty such as
suspension without pay would have sufficed to teach [Fermin] a lesson and for him to realize his wrongdoing.

x x x           x x x          x x x

On another note, [COSMOS], in upholding the legality of [Fermin’s] termination from service, considered the latter’s
past infractions with [COSMOS], i.e. threatening, provoking, challenging, insulting and committing acts of disrespect
to a superior officer/defiance to an instruction and a lawful order of a superior officer; and, sleeping while on duty
and abandonment of duty or leaving assigned post with permission from immediate supervisor, as aggravating
circumstances to his present violation [stealth (sic) of a co-employee’s property]. We disagree with Public
Respondent on this matter.

The correct rule is that previous infractions may be used as justification for an employee’s dismissal from work in
connection with a subsequent similar offense, which is obviously not the case here. x x x.  (Emphases in the
21 

original.)

Labor II – 1
COSMOS and Fermin moved for reconsideration, but the CA likewise denied their motions. Thus, both parties filed
22 

the present Petitions for Review.

COSMOS argues, among other things, that: (a) Fermin committed a clear act of bad faith and dishonesty in taking
the cellphone of Braga and denying knowledge thereof; (b) the latter’s recantation was a mere afterthought; (c) the
lack of material damage or prejudice on the part of COSMOS does not preclude it from imposing the penalty of
termination; and (d) the previous infractions committed by Fermin strengthen the decision of COSMOS to dismiss
him from service.23

On the other hand, Fermin contends that since the CA found that the penalty of dismissal was not proportionate to
his offense, it should have ruled in favor of his entitlement to backwages. 24

It must be noted that in the case at bar, all the lower tribunals were in agreement that Fermin’s act of taking Braga’s
cellphone amounted to theft. Factual findings made by administrative agencies, if established by substantial
evidence as borne out by the records, are final and binding on this Court, whose jurisdiction is limited to reviewing
questions of law. The only disputed issue left for resolution is whether the imposition of the penalty of dismissal was
25 

appropriate. We rule in the affirmative.

Theft committed against a co-employee is considered as a case analogous to serious misconduct, for which the
penalty of dismissal from service may be meted out to the erring employee, viz: 26 

Article 282 of the Labor Code provides:

Article 282. Termination by Employer. - An employer may terminate an employment for any of the following causes:

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

x x x           x x x          x x x

(e) Other causes analogous to the foregoing.

Misconduct involves "the transgression of some established and definite rule of action, forbidden act, a
dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment." For
misconduct to be serious and therefore a valid ground for dismissal, it must be:

1. of grave and aggravated character and not merely trivial or unimportant and

2. connected with the work of the employee.

In this case, petitioner dismissed respondent based on the NBI's finding that the latter stole and used Yuseco’s
credit cards. But since the theft was not committed against petitioner itself but against one of its employees,
respondent's misconduct was not work-related and therefore, she could not be dismissed for serious misconduct.

Nonetheless, Article 282(e) of the Labor Code talks of other analogous causes or those which are susceptible of
comparison to another in general or in specific detail. For an employee to be validly dismissed for a cause
analogous to those enumerated in Article 282, the cause must involve a voluntary and/or willful act or omission of
the employee.

A cause analogous to serious misconduct is a voluntary and/or willful act or omission attesting to an employee’s
moral depravity. Theft committed by an employee against a person other than his employer, if proven by substantial
evidence, is a cause analogous to serious misconduct. (Emphasis supplied.)
27 

Labor II – 1
In this case, the LA has already made a factual finding, which was affirmed by both the NLRC and the CA, that
Fermin had committed theft when he took Braga’s cellphone. Thus, this act is deemed analogous to serious
misconduct, rendering Fermin’s dismissal from service just and valid.

Further, the CA was correct in ruling that previous infractions may be cited as justification for dismissing an
employee only if they are related to the subsequent offense. However, it must be noted that such a discussion was
28 

unnecessary since the theft, taken in isolation from Fermin’s other violations, was in itself a valid cause for the
termination of his employment.

Finally, it must be emphasized that the award of financial compensation or assistance to an employee validly
dismissed from service has no basis in law. Therefore, considering that Fermin’s act of taking the cellphone of his
co-employee is a case analogous to serious misconduct, this Court is constrained to reverse the CA’s ruling as
regards the payment of his full retirement benefits. In the same breath, neither can this Court grant his prayer for
backwages.

WHEREFORE, the Petition in G.R. No. 194303 is DENIED, while that in G.R. No. 193676 is GRANTED. The
Decision dated 20 May 2009 and Resolution dated 8 September 2010 of the Court of Appeals are hereby
REVERSED and SET ASIDE. The Decision dated 20 August 2004 of the Labor Arbiter is REINSTATED.

Labor II – 1
 14.) G.R. No. 197384 : January 30, 2013

SAMPAGUITA AUTO TRANSPORT CORPORATION, Petitioner, v. NATIONAL LABOR

RELATIONS COMMMISSION and EFREN I. SAGAD, Respondent.

DECISION

BRION, J.:

Before the Court is the petition for review on certiorari1 in caption, assailing the decision2 dated
March 4, 2011 and the resolution3 dated June 13, 2011 of the Court of Appeals (CA) in CA-G.R. SP
No. 112760.

The Antecedents

In a complaint4 dated August 10, 2007, respondent Efren I. Sagad charged the petitioner Sampaguita
Auto Transport Corporation (company); Andy Adagio, President and General Manager; Monina Ariola
Adagio, Vice-President and Finance Manager; Virgilio Olunan (referred to as Olonan by Sagad),
Operations Manager; and Gerry Dimate, HRO Officer, with illegal dismissal and damages plus
attorney's fees.

Sagad alleged that on May 14, 2006, the company hired him as a regular bus driver, not as a
probationary employee as the company claimed. He disowned his purported signature on the
contract of probationary Employment5 submitted in evidence by the company. He maintained that his
signature was forged. He further alleged that on November 5, 2006, he was dismissed by the
company for allegedly conniving with conductor Vitola in issuing tickets outside their assigned route.

The company countered that it employed Sagad as a probationary bus driver (evidenced by a
probationary employment contract6) from May 14, 2006 to October 14, 2006; he was duly informed
of his corresponding duties and responsibilities.7 He was further informed that during the
probationary period, his attendance, performance and work attitude shall be evaluated to determine
whether he would qualify for regular employment. For this purpose and as a matter of company
policy, an evaluator was deployed on a company bus (in the guise of a passenger) to observe the
drivers work performance and attitude.

Allegedly, on September 21, 2006, an evaluator boarded Sagads bus. The evaluator described
Sagads manner of driving as "reckless driver, nakikipaggitgitan, nakikipaghabulan, nagsasakay sa
gitna ng kalsada, sumusubsob ang pasahero."8 Sagad disputed the evaluators observations. In an
explanation (rendered in Filipino),9 he claimed that he could not have been driving as reported
because his wife (who was pregnant) and one of his children were with him on the bus. He admitted
though that at one time, he chased an "Everlasting" bus to serve warning on its driver not to block
his bus when he was overtaking. He also admitted that once in a while, he sped up to make up for
lost time in making trips.

The company further alleged that on October 13, 2006, it conducted a thorough evaluation of Sagads
performance. It requested conductors who had worked with Sagad to comment on his work.
Conductors A. Hemoroz and Israel Lucero revealed that Sagad proposed that they cheat on the
company by way of an unreported early bus trip.10 Dispatcher E. Castillo likewise submitted a
negative report and even recommended the termination of Sagads employment.11 The company also
cited Sagads involvement in a hit-and-run accident on September 9, 2006 along Commonwealth
Avenue in Quezon City while on a trip (bus with Plate No. NYK-216 and Body No. 3094).12 Allegedly,
Sagad did not report the accident to the company.

Labor II – 1
On October 15, 2006, upon conclusion of the evaluation, the company terminated Sagads
employment for his failure to qualify as a regular employee.13 ?r?l1

The Compulsory Arbitration Rulings

In her decision dated May 8, 2008,14 Labor Arbiter Marita V. Padolina dismissed the complaint for lack
of merit. She ruled that the company successfully proved that Sagad failed to qualify as a regular
employee. Labor Arbiter Padolina stressed that on October 15, 2006, the company ordered Sagad not
to work anymore as his probationary employment had expired. While Sagad claimed that he worked
until November 5, 2006, she pointed out that "there is no record to show that he worked beyond
October 14, 2006."15 ?r?l1

Sagad appealed the Labor Arbiters ruling. On July 10, 2009, the National Labor Relations Commission
(NLRC) rendered a decision16 declaring that Sagad had been illegally dismissed. It held that Sagad
was not a probationary employee as the company failed to prove by substantial evidence the due
execution of Sagads supposed probationary employment contract. It found credible Sagads
submission that his signature on the purported contract was a forgery. It opined that his signature on
the contract was "extremely different" from his signatures in his pleadings and in other documents on
record. Further, the NLRC brushed aside the company memorandum dated October 15,
200617 supposedly terminating Sagads probationary employment as there was no showing that the
memorandum had been served on him.

The NLRC disregarded Sagads alleged infractions that served as grounds for the termination of his
employment, holding that his dismissal was not based on these infractions but on his alleged
connivance with a conductor in defrauding the company. The NLRC awarded Sagad backwages
of P559,050.00 and separation pay of P45,000.00 in lieu of reinstatement, in view of the strained
relations between the parties resulting from the filing of the complaint.

Both parties moved for reconsideration of the NLRC decision, to no avail. The company then elevated
the case to the CA through a petition for certiorari under Rule 65 of the Rules of Court.

The CA Decision

The CA, in its currently assailed decision,18 affirmed the NLRC rulings in toto, finding no grave abuse
of discretion in the labor tribunals reversal of the labor arbiters dismissal of the complaint. It found
the "genuineness of respondents signature on the employment contract is tainted with doubt."19 It
agreed with the NLRC that Sagad had been illegally dismissed considering, as it noted, that the
grounds the company relied upon for the termination of Sagads employment were not among the
causes for a valid dismissal enumerated under Article 282 of the Labor Code. It added that even if it
had been otherwise, the company failed to comply with the twin-notice requirement in employee
dismissals.

The Petition

The company seeks the reversal of the appellate courts decision through the present appeal,20 and
raises the following issues: cralawlibrary

1. Whether it dismissed Sagad illegally; and

2. Whether Sagad is entitled to backwages and separation pay, totaling P604,050.00, after working
with the company for barely five months.  ???ñr?bl?š  ??r†??l  l?? l?br?rÿ

The company insists that Sagad entered into a contract of probationary employment with it. It was
thus surprised with Sagads allegation that his signature appearing in the contract was a forgery. It
Labor II – 1
explained that his signature on the contract is the same as his signatures on his employment papers
(which include the probationary employment contract). In any event, it faults the NLRC for not
considering other pieces of evidence indicating Sagads actual employment status.

The company points out that one such piece of competent and compelling evidence is Sagads
admission of the nature of his employment expressed in his letter dated October 16, 2006, addressed
to Adagio and Olunan.21 In this letter, he asked for another chance to work with the company.

The company posits that with the letter, Sagad acknowledged that his probationary employment had
expired.22?r?l1

The company maintains that it terminated Sagads employment in good faith. They are not expected
to follow the procedure for dismissing a regular employee, as the NLRC opined, considering that
Sagad was merely on probation. Lastly, it contends that the award of backwages and separation pay
to Sagad amounting to P604,050.00 is unwarranted and confiscatory since he worked for only five
months. It laments that the award would put a premium on reckless driving and would encourage
other drivers to follow Sagads example.

The company disputes the NLRCs basis for the award Sagads purported average daily commission
of P1,000.00 as non-existent. They contend in this respect that the payslips Sagad submitted to the
NLRC rarely showed his daily commission to reach P1,000.00. It explains that Sagad presented only
one (1) payslip for November 2006, five (5) for October 2006, one (1) each for July, August and
September 2006. It posits that the company payrolls from June 29, 2006 to October 8, 2006 showed
that his daily commissions were below P1,000.00.

The Case for Sagad

Through his Comment (on the Petition),23 Sagad asks that the petition be denied due course. He
presents the following arguments: cralawlibrary

1. He was not a probationary employee. The signature on the alleged probationary employment
contract attributed to him was not his; it was a forgery, as confirmed by the NLRC and the CA. The
same thing is true with the supposed letter (dated October 16, 2006)24 in which he allegedly
appealed to be given another chance to work for the company. Not only was the letter not in his
handwriting (it allegedly belonged to Vitara, a bus conductor of the company), the signature on the
letter attributed to him was also falsified.

2. On the assumption that he was a probationary employee, it is not correct to say that he failed to
qualify for regular employment. The written statements of bus conductors Hemoroz and
Lucero25 regarding his alleged attempt to cheat on the company are without probative value. The
statements were not under oath and the irregular acts he allegedly proposed could only be done by
the conductors.  ???ñr?bl?š  ??r†??l  l?? l?br?rÿ

The companys claim that he figured in a "hit-and-run" accident on September 9, 2006, which he
allegedly did not report to management, is not also correct. It was not his bus that was involved in
the accident that he duly reported to the management. Further, the companys contention that he
drove recklessly on September 16, 2006 cannot be used to support his dismissal as he had already
been penalized for the incident with a five-day suspension.26 ?r?l1

Also, the company grounds in Castillos evaluation report27 (that the company relied upon to justify
the non-renewal of his contract) are not just causes for the termination of his employment as the CA
correctly ruled.

Labor II – 1
3. He was a regular employee. He continued to work as driver until November 4, 2006. The
companys notice of termination of his Employment28 was not served on him because no such letter
existed. If his probationary employment was to expire on October 14, 2006, he asks: why was he
evaluated only on October 13 and 14, 2006 and why did the company serve him the termination
notice only on October 15, 2006, when he was supposed to have been separated the previous day,
October 14, 2006? He adds: when was the notice served on him that would have prompted him to
write the company a letter on October 16, 2006 to ask for a second chance? All these nagging
questions, he stresses, demonstrate the incredibility of the companys claim that he was a
probationary employee.

4. He does not have to prove his denial that the signatures on the above-mentioned documents were
not really his. He posits that evidence need not be given in support of a negative allegation and this
is particularly true in dismissal cases where the burden of proof is on the employer.

5. The petition suffers from a procedural defect as it raises only questions of fact and not of law, in
violation of Rule 45 of the Rules of Court.

The Courts Ruling

The procedural issue

This Court, as a rule, only reviews questions of law in a Rule 45 petition for review. In labor cases,
the factual findings of the labor arbiter and of the NLRC are generally respected and, if supported by
substantial evidence, accorded finality. This rule, however, is not absolute. When the factual findings
of the CA conflict with those of the labor authorities, the Court is forced to review the evidence on
record.29?r?l1

In this case, the labor arbiters factual conclusions, on the one hand, and those of the NLRC and the
CA, on the other hand, differ. The labor arbiter found that Sagad was a probationary employee and
was validly dismissed for his failure to qualify for regular employment, whereas the NLRC and the CA
concluded that he was a regular employee and was illegally dismissed. We thus find the need to
review the facts in the present labor dispute.

The merits of the case

After a review of the records, we are convinced that Sagad was dismissed, not as a probationary
employee, but as one who had attained regular status. The companys evidence on Sagads purported
hiring as a probationary employee is inconclusive. To start with, Sagad denied that he entered into a
probationary employment contract with the company, arguing that the signature on the supposed
contract was not his.30 He also denied receiving the alleged notice31 terminating his probationary
employment. The same thing is true with his purported letter32 asking that he be given another
chance to work for the company. He asserts that not only is the letter not in his handwriting, the
signature on the letter was also not his.

The submissions of the parties on the issue created a doubt on whether Sagad really entered into a
probationary employment contract with the company. The NLRC resolved the doubt in Sagads favor,
ruling that Sagads signature on the contract was not his, because it was a forgery. It declared that
his signature on the contract "is extremely different from those in his pleadings and from the other
documents on record,"33 without explaining how and why the two sets of signatures were vastly
different. Lending further support to the NLRC conclusion, which the CA upheld, is its finding that the
company failed to refute Sagads denial of his signature in the contract, which the labor tribunal
considered as an admission of the veracity of Sagads statement, pursuant to the Rules of Court.34 ?r?l1

Labor II – 1
Independently of the above discussion and even if we were to consider that Sagad went through a
probationary period, the records indicate that he was retained even beyond the expiration of his
supposed probationary employment on October 14, 2006. As the NLRC noted, Sagad claimed that he
was dismissed by the company on November 5, 2006, after he was accused of conniving with
conductor Vitola in issuing tickets outside their assigned route.

The company never refuted this particular assertion of Sagad and its silence can only mean that
Sagad remained in employment until November 4, 2006, thereby attaining regular status as of that
date. Under the law, "an employee who is allowed to work after a probationary period shall be
considered a regular employee."35 ?r?l1

Further, when the company questioned the payslips submitted by Sagad to substantiate his claim
that he earned on the average a daily commission of P1,000.00, it pointed out that Sagad presented
only one (1) payslip for the whole month of November 2006, five (5) payslips for the month of
October 2006, and one (1) payslip each for the months of July, August and September 2006.36 This
seemingly harmless allegation is significant in that it revealed that Sagad continued working until the
first week of November 2006 and was paid his salary for at least one payroll period. Sagad,
therefore, had become a regular employee when he was dismissed on November 5, 2006.

Is Sagads dismissal illegal?

The NLRC and the CA ruled in the affirmative. The labor tribunal opined that the infractions which
Sagad allegedly committed and which disqualified him from attaining regular status are "unavailing"
with respect to his dismissal because the dismissal was not based on those infractions but on his
alleged connivance with conductor Vitola to cheat on the company.

The CA concurred with the NLRC but for a different reason. It declared that the "grounds upon which
petitioners based respondents termination from employment, viz: hindi lahat ng schedule nailalabas,
mababa ang revenue ng bus, laging kasama ang asawa sa byahe and maraming naririnig na kwento
tungkol sa kanya, nag-uutos ng conductor para kumita sa hindi magandang paraan, xxx are not
among those enumerated under Article 282 of the Labor Code as just causes for termination of
employment."37 The CA added that on the assumption that the cited grounds can be considered just
causes, the company nonetheless failed to comply with the twin-notice requirement for the
termination of Sagads employment.

We disagree with the finding that Sagads dismissal had no basis.

First. It is not disputed that the company called Sagads attention to his negative actuations as a bus
driver, which were reported by a company evaluator38 who boarded his bus on September 21, 2006.
The evaluator reported that he was driving recklessly, racing and jostling for position on the road,
thereby jarring the passengers on their seats, and picking up passengers on the middle of the road.
He disputed the evaluators observations,39 claiming that he could not have been driving as reported
because his pregnant wife and one of his children were with him on the bus at the time. He admitted,
however, that on one occasion, he chased an "Everlasting" bus to warn its driver not to block him. He
also admitted that once in a while, he sped up to compensate for lost time in his trips.

Sagads explanation reveals more than what it stated. During his brief employment with the
company, he exhibited the tendency to speed up when he finds the need for it, very obviously in
violation of traffic rules, regulations and company policy. Instead of negating the evaluators
observations, his admissions make them credible.

Second. He was also asked to react to the comments of conductors who had worked with him
(Hemoroz and Lucero) to the effect that he proposed to them that they cheat on the company by
making early (but not to be reported) bus trips.40 Further, there was Castillos evaluation dated
Labor II – 1
October 13, 2006,41 rating Sagads work performance as poor on account of: (1) the low revenue of
Sagads bus; (2) his inability to make all his scheduled trips; and (3) his habit of bringing his wife
with him on his trips. Castillo also heard of talks of Sagads orders to the conductors to earn money in
a questionable way.

During the arbitration, Sagad disputed the conductors comments, maintaining that they were not
under oath and that the fraudulent proposal they mentioned could only be committed by conductors.
With respect to Castillos evaluation, Sagad invoked the CAs pronouncement that the infractions
mentioned in the report are not just causes for the termination of his employment.

Sagads position fails to convince us. We find no evidence that Hemoroz and Lucero had an ax to
grind against Sagad so that they would lie about their impression of him as a bus driver.
Significantly, their statements validate Castillos own observation that he heard talks of Sagads orders
to the conductors for them to cheat on the company. The scheme, contrary to Sagads explanation,
can only be committed with the cooperation, or even at the behest, of the driver, as the proposed
scheme is for the bus to make unscheduled, but unreported, early trips.

Lastly, the company cites Sagads involvement in a hit-and-run incident on September 9, 2006 while
driving his assigned bus (with Plate No. NYK-216 and Body No. 3094).42 Once more, he denies the
charge, claiming that it was not his bus, but two other vehicles, a Honda City and an Elf truck, which
figured in the incident.43 To prove his point, he submitted the "SALAYSAY"44 of his replacement driver,
Carlito Laude, for September 10, 2006, saying that there was no dents or scratches on the bus.

Again, Sagads stance fails to persuade us. Sagads statements vis-à-vis the incident, as well as those
of Laude, are belied by the Traffic Accident Investigation Report45 which mentioned the "Unidentified
driver of Public Utility Bus with plate No. NYK-216 and Body No. 3094." The report was corroborated
by the sworn statements of Ronald Apura, driver of the Elf truck, UFF-597, the second party in the
incident,46 and Bibiana Fuentes, driver of the White Honda City, WDV-422 (owned by Purefoods
Hormel Co.), the first party in the vehicular accident. There was also the letter to the company of
Standard Insurance Co., Inc. dated February 14, 200747 demanding the reimbursement
of P24,667.54 it paid to Purefoods Hormel Co. by way of damages sustained by the Honda City.

Third. The CA misappreciated the law when it declared that the grounds relied upon by the company
in terminating Sagads employment are not among those enumerated under Article 282 of the Labor
Code as just causes for employee dismissals. Article 282 of the Code provides: cralawlibrary

Art. 282. Termination by employer. An employer may terminate an employment for any of the
following causes:cralawlibrary

(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. [emphasis supplied]  ???ñr?bl?š ??r†??l  l?? l?br?rÿ

The irregularities or infractions committed by Sagad in connection with his work as a bus
driver constitute a serious misconduct or, at the very least, conduct analogous to serious
Labor II – 1
misconduct, under the above-cited Article 282 of the Labor Code. To be sure, his tendency to
speed up during his trips, his reckless driving, his picking up passengers in the middle of the road,
his racing with other buses and his jostling for vantage positions do not speak well of him as a bus
driver. While he denies being informed, when he was hired, of the duties and responsibilities of a
driver contained in a document submitted in evidence by the company48 the requirement "3. to obey
traffic rules and regulations as well as the company policies. 4. to ensure the safety of the riding
public as well as the other vehicles and motorist (sic)"49 is so fundamental and so universal that any
bus driver is expected to satisfy the requirement whether or not he has been so informed.

Sagad tries to minimize the adverse effect of the evaluators report of September 21, 2006 about his
conduct as a driver with the argument that he had already been penalized with a five-day suspension
for chasing an "Everlasting" bus at one time. The suspension is of no moment. He was penalized for
one reckless driving incident, but it does not erase all the other infractions he committed. The
conductors comments and the dispatchers evaluation, together with the earlier on-board evaluation,
all paint a picture of a reckless driver who endangers the safety of his passengers, other motorists
and the general public. With this record, it is not surprising that he figured in a hit-and-run accident
on September 9, 2006.

Under the circumstances, Sagad has become a liability rather than an asset to his employer, more so
when we consider that he attempted to cheat on the company or could have, in fact, defrauded the
company during his brief tenure as a bus driver. This calls to mind Castillos report on the low
revenue of Sagads bus, an observation which is validated by the companys Daily Operation Reports
from June to October 2006.50 ?r?l1

All told, we find substantial evidence supporting Sagads removal as a bus driver. Through his
reckless driving and his schemes to defraud the company, Sagad committed serious misconduct and
breach of the trust and confidence of his employer, which, without doubt, are just causes for his
separation from the service. It is well to stress, at this point, an earlier pronouncement of the Court
"that justice is in every case for the deserving, to be dispensed in the light of the established facts
and applicable law and doctrine."51 ?r?l1

The twin-notice requirement

Even as we find a just cause for Sagads dismissal, we agree with the CA that the company failed to
comply with the two-notice rule. It failed to serve notice of: (1) the particular acts for which Sagad
was being dismissed on November 5, 2006 and (2) his actual dismissal. Consistent with our ruling in
Agabon v. NLRC, 52 we hold that the violation of Sagad's right to procedural due process entitles him
to an indemnity in the form of nominal damages. Considering the circumstances in the present case,
we deem it appropriate to award Sagad P30,000.00.

WHEREFORE, premises considered, the appeal is granted. The assailed decision and resolution of the
Court of Appeals are SET ASIDE. The complaint is DISMISSED for lack of merit. Efren I. Sagad is
awarded nominal damages of P30,000.00 for violation of his right to procedural due process.

Labor II – 1
15.) G.R. No. 163431               August 28, 2013

NATHANIEL N. DONGON, PETITIONER,
vs.
RAPID MOVERS AND FORWARDERS CO., INC., AND/OR NICANOR E. JAO, JR., RESPONDENTS.

DECISION

BERSAMIN, J.:

The prerogative of the employer to dismiss an employee on the ground of willful disobedience to company policies
must be exercised in good faith and with due regard to the rights of labor.

The Case

By petition for review on certiorari, petitioner appeals the adverse decision promulgated on October 24,
2003,1 whereby the Court of Appeals (CA) set aside the decision dated June 17, 2002 of the National Labor
Relations Commission (NLRC) in his favor.2 The NLRC had thereby reversed the ruling dated September 10, 2001
of the Labor Arbiter dismissing his complaint for illegal dismissal.3

Antecedents

The following background facts of this case are stated in the CA’s assailed decision, viz:

From the records, it appears that petitioner Rapid is engaged in the hauling and trucking business while private
respondent Nathaniel T. Dongon is a former truck helper leadman.

Private respondent’s area of assignment is the Tanduay Otis Warehouse where he has a job of facilitating the
loading and unloading [of the] petitioner’s trucks. On 23 April 2001, private respondent and his driver, Vicente
Villaruz, were in the vicinity of Tanduay as they tried to get some goods to be distributed to their clients.

Tanduay’s security guard called the attention of private respondent as to the fact that Mr. Villaruz’[s] was
not wearing an Identification Card (I.D. Card). Private respondent, then, assured the guard that he will secure a
special permission from the management to warrant the orderly release of goods.

Instead of complying with his compromise, private respondent lent his I.D. Card to Villaruz; and by reason
of such misrepresentation , private respondent and Mr. Villaruz got a clearance from Tanduay for the
release of the goods. However, the security guard, who saw the misrepresentation committed by private
respondent and Mr. Villaruz, accosted them and reported the matter to the management of Tanduay.

On 23 May 2001, after conducting an administrative investigation, private respondent was dismissed from the
petitioning Company.

On 01 June 2001, private respondent filed a Complaint for Illegal Dismissal. x x x4

In his decision, the Labor Arbiter dismissed the complaint, and ruled that respondent Rapid Movers and Forwarders
Co., Inc. (Rapid Movers) rightly exercised its prerogative to dismiss petitioner, considering that: (1) he had admitted
lending his company ID to driver Vicente Villaruz; (2) his act had constituted mental dishonesty and deceit
amounting to breach of trust; (3) Rapid Movers’ relationship with Tanduay had been jeopardized by his act; and (4)
he had been banned from all the warehouses of Tanduay as a result, leaving Rapid Movers with no available job for
him.5

On appeal, however, the NLRC reversed the Labor Arbiter, and held that Rapid Movers had not discharged its
burden to prove the validity of petitioner’s dismissal from his employment. It opined that Rapid Movers did not suffer

Labor II – 1
any pecuniary damage from his act; and that his dismissal was a penalty disproportionate to the act of petitioner
complained of. It awarded him backwages and separation pay in lieu of reinstatement, to wit:

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE and a new one ENTERED ordering the
payment of his backwages from April 25, 2001 up to the finality of this decision and in lieu of reinstatement, he
should be paid his separation pay from date of hire on May 2, 1994 up to the finality hereof.

SO ORDERED.6

Rapid Movers brought a petition for certiorari in the CA, averring grave abuse of discretion on the part of the NLRC,
to wit:

I.

x x x IN STRIKING DOWN THE DISMISSAL OF THE PRIVATE RESPONDENT [AS] ILLEGAL ALLEGEDLY FOR
BEING GROSSLY DISPROPORTIONATE TO THE OFFENSE COMMITTED IN THAT NEITHER THE
PETITIONERS NOR ITS CLIENT TANDUAY SUFFERED ANY PECUNIARY DAMAGE THEREFROM THEREBY
IMPLYING THAT FOR A DISHONEST ACT/MISCONDUCT TO BE A GROUND FOR DISMISSAL OF AN
EMPLOYEE, THE SAME MUST AT LEAST HAVE RESULTED IN PECUNIARY DAMAGE TO THE EMPLOYER;

II.

x x x IN EXPRESSING RESERVATION ON THE GUILT OF THE PRIVATE RESPONDENT IN THE LIGHT OF ITS
PERCEIVED CONFLICTING DATES OF THE LETTER OF TANDUAY TO RAPID MOVERS (JANUARY 25, 2001)
AND THE OCCURRENCE OF THE INCIDENT ON APRIL 25, 2001 WHEN SAID CONFLICT OF DATES
CONSIDERING THE EVIDENCE ON RECORD, WAS MORE APPARENT THAN REAL.7

Ruling of the CA

On October 24, 2003, the CA promulgated its assailed decision reinstating the decision of the Labor Arbiter, and
upholding the right of Rapid Movers to discipline its workers, holding thusly:

There is no dispute that the private respondent lent his I.D. Card to another employee who used the same in
entering the compound of the petitioner customer, Tanduay. Considering that this amounts to dishonesty and is
provided for in the petitioning Company’s Manual of Discipline, its imposition is but proper and appropriate.

It is basic in any enterprise that an employee has the obligation of following the rules and regulations of its
employer. More basic further is the elementary obligation of an employee to be honest and truthful in his work. It
should be noted that honesty is one of the foremost criteria of an employer when hiring a prospective employee.
Thus, we see employers requiring an NBI clearance or police clearance before formally accepting an applicant as
their employee. Such rules and regulations are necessary for the efficient operation of the business.

Employees who violate such rules and regulations are liable for the penalties and sanctions so provided, e.g., the
Company’s Manual of Discipline (as in this case) and the Labor Code.

The argument of the respondent commission that no pecuniary damage was sustained is off-tangent with the facts
of the case. The act of lending an ID is an act of dishonesty to which no pecuniary estimate can be ascribed for the
simple reason that no monetary equation is involved. What is involved is plain and simple adherence to truth and
violation of the rules. The act of uttering or the making of a falsehood does not need any pecuniary estimate for the
act to gestate to one punishable under the labor laws. In this case, the illegal use of the I.D. Card while it may
appear to be initially trivial is of crucial relevance to the petitioner’s customer, Tanduay, which deals with drivers and
leadmen withdrawing goods and merchandise from its warehouse. For those with criminal intentions can use
another’s ID to asport goods and merchandise.

Labor II – 1
Hence, while it can be conceded that there is no pecuniary damage involved, the fact remains that the offense does
not only constitute dishonesty but also willful disobedience to the lawful order of the Company, e.g., to observe at all
time the terms and conditions of the Manual of Discipline. Article 282 of the Labor Code provides:

"Termination by Employer – An employer may terminate an employment for any of the following causes:

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

x x x." (Emphasis, supplied)

The constitutional protection afforded to labor does not condone wrongdoings by the employee; and an employer’s
power to discipline its workers is inherent to it. As honesty is always the best policy, the Court is convinced that the
ruling of the Labor Arbiter is more in accord with the spirit of the Labor Code. "The Constitutional policy of providing
full protection to labor is not intended to oppress or destroy management (Capili vs. NLRC, 270 SCRA 488[1997]."
Also, in Atlas Fertilizer Corporation vs. NLRC, 273 SCRA 549 [1997], the Highest Magistrate declared that "The law,
in protecting the rights of the laborers, authorizes neither oppression nor self-destruction of the employer."

WHEREFORE, premises considered, the Petition is GRANTED. The assailed 17 June 2002 Decision of respondent
Commission in NLRC CA-029937-01 is hereby SET ASIDE and the 10 September 2001 Decision of Labor Arbiter
Vicente R. Layawen is ordered REINSTATED. No costs.

SO ORDERED.8

Petitioner moved for a reconsideration, but the CA denied his motion on March 22, 2004.9

Undaunted, the petitioner is now on appeal.

Issue

Petitioner still asserts the illegality of his dismissal, and denies being guilty of willful disobedience. He contends that:

THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN SUSTAINING THE
DECISION DATED 10 SEPTEMBER 2001 OF LABOR ARBITER VICENTE R. LAYAWEN WHERE THE LATTER
RULED THAT BY LENDING HIS ID TO VILLARUZ, PETITIONER (COMPLAINANT) COMMITTED
MISREPRESENTATION AND DECEIT CONSTITUTING MENTAL DISHONESTY WHICH CANNOT BE
DISCARDED AS INSIGNIFICANT OR TRIVIAL.10

Petitioner argues that his dismissal was discriminatory because Villaruz was retained in his employment as driver;
and that the CA gravely abused its discretion in disregarding his showing that he did not violate Rapid Movers’ rules
and regulations but simply performed his work in line with the duties entrusted to him, and in not appreciating his
good faith and lack of any intention to willfully disobey the company’s rules.

In its comment,11 Rapid Movers prays that the petition for certiorari be dismissed for being an improper remedy and
apparently resorted to as a substitute for a lost appeal; and insists that the CA did not commit grave abuse of
discretion.1âwphi1

In his reply,12 petitioner submits that his dismissal was a penalty too harsh and disproportionate to his supposed
violation; and that his dismissal was inappropriate due to the violation being his first infraction that was even
committed in good faith and without malice.

Based on the parties’ foregoing submissions, the issues to be resolved are, firstly: Was the petition improper and
dismissible?; and, secondly: If the petition could prosper, was the dismissal of petitioner on the ground of
willful disobedience to the company regulation lawful?

Labor II – 1
 Ruling

The petition has merit.

1.

Petition should not be dismissed

In St. Martin Funeral Home v. National Labor Relations Commission,13 the Court has clarified that parties seeking
the review of decisions of the NLRC should file a petition for certiorari in the CA on the ground of grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the NLRC. Thereafter, the remedy of the
aggrieved party from the CA decision is an appeal via petition for review on certiorari.14

The petition filed here is self-styled as a petition for review on certiorari, but Rapid Movers points out that the petition
was really one for certiorari under Rule 65 of the Rules of Court due to its basis being the commission by the CA of
a grave abuse of its discretion and because the petition was filed beyond the reglementary period of appeal under
Rule 45. Hence, Rapid Movers insists that the Court should dismiss the petition because certiorari under Rule 65
could not be a substitute of a lost appeal under Rule 45.

Ordinarily, an original action for certiorari will not prosper if the remedy of appeal is available, for an appeal by
petition for review on certiorari under Rule 45 of the Rules of Court and an original action for certiorari under Rule 65
of the Rules of Court are mutually exclusive, not alternative nor successive, remedies.15 On several occasions,
however, the Court has treated a petition for certiorari as a petition for review on certiorari when: (a) the petition has
been filed within the 15-day reglementary period;16 (b) public welfare and the advancement of public policy dictate
such treatment; (c) the broader interests of justice require such treatment; (d) the writs issued were null and void; or
(e) the questioned decision or order amounts to an oppressive exercise of judicial authority.17

The Court deems it proper to allow due course to the petition as one for certiorari under Rule 65 in the broader
interest of substantial justice, particularly because the NLRC’s appellate adjudication was set aside by the CA, and
in order to put at rest the doubt that the CA, in so doing, exercised its judicial authority oppressively. Whether the
petition was proper or not should be of less importance than whether the CA gravely erred in undoing and setting
aside the determination of the NLRC as a reviewing forum vis-à-vis the Labor Arbiter. We note in this regard that the
NLRC had declared the dismissal of petitioner to be harsh and not commensurate to the infraction committed. Given
the spirit and intention underlying our labor laws of resolving a doubtful situation in favor of the working man, we will
have to review the judgment of the CA to ascertain whether the NLRC had really committed grave abuse of its
discretion. This will settle the doubts on the propriety of terminating petitioner, and at the same time ensure that
justice is served to the parties.18

2.

Petitioner was not guilty of willful disobedience; hence, his dismissal was illegal

Petitioner maintains that willful disobedience could not be a ground for his dismissal because he had acted
in good faith and with the sole intention of facilitating deliveries for Rapid Movers when he allowed Villaruz
to use his company ID.

Willful disobedience to the lawful orders of an employer is one of the valid grounds to terminate an employee under
Article 296 (formerly Article 282) of the Labor Code.19 For willful disobedience to be a ground, it is required that:
(a) the conduct of the employee must be willful or intentional; and (b) the order the employee violated must
have been reasonable, lawful, made known to the employee, and must pertain to the duties that he had been
engaged to discharge.20 Willfulness must be attended by a wrongful and perverse mental attitude rendering the
employee’s act inconsistent with proper subordination.21 In any case, the conduct of the employee that is a valid
ground for dismissal under the Labor Code constitutes harmful behavior against the business interest or
person of his employer.22 It is implied that in every act of willful disobedience, the erring employee obtains undue
advantage detrimental to the business interest of the employer.

Labor II – 1
Under the foregoing standards, the disobedience attributed to petitioner could not be justly characterized as willful
within the contemplation of Article 296 of the Labor Code. He neither benefitted from it, nor thereby prejudiced
the business interest of Rapid Movers. His explanation that his deed had been intended to benefit Rapid
Movers was credible. There could be no wrong or perversity on his part that warranted the termination of
his employment based on willful disobedience.

Rapid Movers argues, however, that the strict implementation of company rules and regulations should be accorded
respect as a valid exercise of its management prerogative. It posits that it had the prerogative to terminate petitioner
for violating its following company rules and regulations, to wit:

(a) "Pagpayag sa paggamit ng iba o paggamit ng maling rekord ng kumpanya kaugnay sa operations,
maintenance or materyales o trabaho" (Additional Rules and Regulations No. 2); and

(b) "Pagkutsaba sa pagplano o pagpulong sa ibang tao upang labagin ang anumang alituntunin ng
kumpanya" (Article 5.28).23

We cannot sustain the argument of Rapid Movers.

It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad discretion
includes the implementation of company rules and regulations and the imposition of disciplinary measures on its
employees. But the exercise of a management prerogative like this is not limitless, but hemmed in by good faith and
a due consideration of the rights of the worker.24 In this light, the management prerogative will be upheld for as long
as it is not wielded as an implement to circumvent the laws and oppress labor.25

To us, dismissal should only be a last resort, a penalty to be meted only after all the relevant circumstances have
been appreciated and evaluated with the goal of ensuring that the ground for dismissal was not only serious but
true. The cause of termination, to be lawful, must be a serious and grave malfeasance to justify the
deprivation of a means of livelihood. This requirement is in keeping with the spirit of our Constitution and laws to
lean over backwards in favor of the working class, and with the mandate that every doubt must be resolved in their
favor.26

Although we recognize the inherent right of the employer to discipline its employees, we should still ensure that the
employer exercises the prerogative to discipline humanely and considerately, and that the sanction imposed is
commensurate to the offense involved and to the degree of the infraction. The discipline exacted by the employer
should further consider the employee’s length of service and the number of infractions during his employment.27 The
employer should never forget that always at stake in disciplining its employee are not only his position but also his
livelihood,28 and that he may also have a family entirely dependent on his earnings.29

Considering that petitioner’s motive in lending his company ID to Villaruz was to benefit Rapid Movers as their
employer by facilitating the loading of goods at the Tanduay Otis Warehouse for distribution to Rapid Movers’
clients, and considering also that petitioner had rendered seven long unblemished years of service to Rapid Movers,
his dismissal was plainly unwarranted. The NLRC’s reversal of the decision of the Labor Arbiter by holding that
penalty too harsh and disproportionate to the wrong attributed to him was legally and factually justified, not arbitrary
or whimsical. Consequently, for the CA to pronounce that the NLRC had thereby gravely abused its discretion was
not only erroneous but was itself a grave abuse of discretion amounting to lack of jurisdiction for not being in
conformity with the pertinent laws and jurisprudence. We have held that a conclusion or finding derived from
erroneous considerations is not a mere error of judgment but one tainted with grave abuse of discretion.30

WHEREFORE, the Court GRANTS the petition; REVERSES and SETS ASIDE the decision promulgated by the
Court of Appeals on October 24, 2003; REINSTATES the decision of the National Labor Relations Commission
rendered on June 17, 2002; and ORDERS respondents to pay the costs of suit.

Labor II – 1
 16.) [G.R. No. 173489, February 25, 2013]

ALILEM CREDIT COOPERATIVE, INC., NOW KNOWN AS ALILEM MULTIPURPOSE

COOPERATIVE, INC., Petitioner, v. SALVADOR M. BANDIOLA, JR., Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner Alilem
Credit Cooperative, Inc. against respondent Salvador M. Bandiola, Jr. assailing the Court of Appeals
(CA) Decision1 dated January 16, 2006 and Resolution2 dated July 5, 2006 in CA-G.R. SP No. 64554.

The case stemmed from the following facts:

Respondent was employed by petitioner as bookkeeper. Petitioner’s Board of Directors (the Board)
received a letter from a certain Napoleon Gao-ay (Napoleon) reporting the alleged immoral conduct
and unbecoming behavior of respondent by having an illicit relationship with Napoleon’s sister,
Thelma G. Palma (Thelma). This prompted the Board to conduct a preliminary investigation.3

During the preliminary investigation, the Board received the following evidence of respondent’s
alleged extramarital affair:

1. Melanie Gao-ay’s (Melanie) sworn statement declaring that sometime in December

1996, respondent slept on the same bed with Thelma in a boarding house in San
Fernando, La Union where she (Melanie) and Thelma resided. She personally witnessed
the intimacy of respondent and Thelma when they engaged in lovemaking as they slept
in one room and openly displayed their affection for each other.4

2. Rosita Tegon’s (Rosita) sworn statement that on May 23, 1997, she saw Thelma talk to
respondent in petitioner’s office asking him to accompany her in San Fernando, La
Union.5

3. Emma Gao-ay Lubrin’s (Emma, Thelma’s sister) interview wherein she  admitted that
she and her family confronted Thelma about the alleged extramarital affair which
Thelma allegedly admitted.6

4. Napoleon’s interview with the Board wherein he claimed that their family tried to
convince Thelma to end her extramarital affair with respondent but instead of
complying, she in fact lived together with respondent.7

The Board decided to form an Ad Hoc Committee to investigate the charges against respondent
yielding the following additional evidence:

1. Agustina Boteras’ (Agustina) sworn statement that she witnessed a confrontation

between Thelma and her sister in the latter’s residence concerning the alleged
extramarital affair. At that time, respondent’s wife was allegedly present who in fact
pleaded Thelma to end her relationship with respondent but she supposedly said “No
way!”8]

2. Milagros Villacorte’s sworn statement that while she was at the Bethany Hospital in San
Fernando, La Union where her husband was confined, respondent approached her and

Labor II – 1
 asked her to look for Thelma who was then having her class. When he finally found her,
respondent and Thelma met and talked in the hospital premises.9]

3. Julienne Marie L. Dalangey’s certification that on August 9 to 10, 1996, respondent

attended a seminar on Internal Control and Systems Design I at the Northern Luzon
Federation of Cooperatives and Development Center (NORLU) Pension House in Baguio
City, together with a lady companion whom he introduced as his wife. Apparently, the
lady was not his wife because at that time, his wife reported for work in the Municipal
Hall of Alilem.10]

Respondent, on the other hand, denied the accusation against him. He, instead, claimed that the
accusation was a result of the insecurity felt by some members of the cooperative and of the Board
because of his growing popularity owing to his exemplary record as an employee.11 Thelma executed
an affidavit likewise denying the allegations of extra-marital affair.12

Meanwhile, on June 7, 1997, the Board received a petition from about fifty members of the
cooperative asking the relief of respondent due to his illicit affair with Thelma.13

In its Summary Investigation Report, the Ad Hoc Committee concluded that respondent was involved
in an extra-marital affair with Thelma. On July 10, 1997, the Chairman of the Board sent a letter14 to
respondent informing him of the existence of a prima facie case against him for “illicit marital affair,
an act that brings discredit to the cooperative organization and a cause for termination per AMPC
(Alilem Multi-Purpose Cooperative) Personnel Policy.  Respondent was directed to appear and be
present at the AMPC office for a hearing.  He was likewise advised of his right to be assisted by
counsel.

On the day of the hearing, respondent requested 15 for postponement on the ground that
his lawyer was not available. The request was, however, denied and the hearing proceeded
as scheduled.

In a Memorandum16 dated July 16, 1997, respondent was informed of Board Resolution No. 05, series
of 199717 embodying the Board’s decision to terminate his services as bookkeeper of petitioner,
effective July 31, 1997, without any compensation or benefit except the unpaid balance of his regular
salary for services actually rendered.18

Aggrieved, respondent filed a Complaint for Illegal Dismissal against petitioner before the Regional
Arbitration Branch of the National Labor Relations Commission (NLRC).19

On April 30, 1998, the Labor Arbiter (LA) dismissed20 respondent’s complaint for lack of merit. The LA
concluded that respondent had been or might still be carrying on an affair with a married woman.
The LA found it unforgiving in the case of a married employee who sleeps with or has illicit relations
with another married person for in such case, the employee sullies not only the reputation of his
spouse and his family but the reputation as well of the spouse of his paramour and the latter’s
family.21 As opposed to respondent’s claim that the accusation is a mere fabrication of some of the
directors or cooperative members who were allegedly envious of his growing popularity, the LA gave
more credence to the testimonies of petitioner’s witnesses who were relatives of Thelma and who had
no motive to falsely testify because their family reputation was likewise at a risk of being
tarnished.22 The LA, thus, found respondent to have been validly dismissed from employment for
violation of the cooperative’s Personnel Policy, specifically “the commission of acts that bring discredit
to the cooperative organization, especially, but not limited to conviction of any crime, illicit marital
affairs, scandalous acts inimical to established and accepted social mores.” The LA also found no
violation of respondent’s right to due process as he was given ample opportunity to defend himself
from the accusation against him.23

On appeal, the NLRC set aside24 the LA decision and rendered a judgment disposed in this wise:
Labor II – 1
WHEREFORE, the appealed Decision of the Executive Labor Arbiter is SET ASIDE. Judgment is hereby
rendered:

1. declaring respondent Alilem Credit Cooperative, Inc. (ACCI) also known as Alilem
Multi-Purpose Cooperative (AMPC) guilty of illegal dismissal for the reasons
above-discussed;

2. directing the said respondent to pay complainant Salvador Bandiola, Jr. full
backwages computed from the time of (sic) his wages were withheld until finality
of this judgment;

3. directing, on account of strained relationship between the parties, the above-

named respondent to pay complainant, in lieu of reinstatement, separation pay
computed at one (1) month pay for every year of service, a fraction of six (6)
months to be computed as one (1) whole year; [and]

4. directing respondent to pay complainant ten (10%) percent attorney’s fees

based on the total monetary award.

SO ORDERED.25

The NLRC found petitioner’s Personnel Policy to be of questionable existence and validity because it
was unnumbered.26 It held that even assuming that respondent had an extra-marital affair with a
married woman, the latter is not his fellow worker in petitioner’s business establishment.27 It, thus,
concluded that respondent’s dismissal was not founded on any of the just causes for termination of
employment under Article 282 of the Labor Code, as amended.28 It, likewise, declared that
respondent was not afforded his right to his counsel of choice as his request for postponement was
not allowed.29 Therefore, the NLRC declared respondent’s dismissal from employment illegal, entitling
him to the payment of backwages, separation pay, and attorney’s fees.30

Petitioner elevated the matter to the CA, but it failed to obtain a favorable decision. The CA found
respondent’s dismissal being founded on the serious misconduct he allegedly committed by carrying
an illicit relationship with a married woman.31 While considering said act a serious misconduct, it
refused to consider it sufficient to justify respondent’s dismissal, because it was not done in the
performance of his duties as would make him unfit to continue working for petitioner.32 Petitioner’s
motion for reconsideration was likewise denied in the assailed July 5, 2006 resolution.

Unsatisfied, petitioner now comes before the Court in this petition for review on certiorari  insisting on
the validity of respondent’s dismissal from employment.

We find merit in the petition.

It is undisputed that respondent was dismissed from employment for engaging in

extramarital affairs, a ground for termination of employment stated in petitioner’s
Personnel Policy. This basis of termination was made known to respondent as early as the first
communication made by petitioner. In its June 20, 1997 letter, petitioner directed respondent to
explain in writing or personal confrontation why he should not be terminated for violation of Section
4.1.4 of the Personnel Policy.33 Respondent merely denied the accusation against him34 and did not
question the basis of such termination. When the LA was called upon to decide the illegal dismissal
case, it ruled in favor of petitioner and upheld the basis of such dismissal which is the cited Personnel
Policy. The NLRC, however, refused to recognize the existence and validity of petitioner’s Personnel
Policy on which the ground for termination was embodied.35

The existence of the Personnel Policy containing provisions on the grounds for termination of
Labor II – 1
employees was not questioned by respondent. In his position paper, respondent only assailed the
effectivity of the policy, as for him as it was amended on the same date as the letter-complaints
against him. In other words, he claimed that the policy was amended in order to include therein the
ground for his termination to make sure that he is removed from his position.36

We do not subscribe to such an argument.

A comparison of petitioner’s old and new Personnel Policies attached by respondent himself to his
Position Paper shows that under the old policy, one of the grounds for termination of an employee is
“commission of acts or commission (sic) of duties that bring discredit to the
organization,37” while under the new policy, one of the grounds is the “commission of acts that
brings (sic) discredit to the cooperative organization, especially, but not limited to,
conviction of any crime, illicit marital affairs, scandalous acts inimical to established and
accepted social mores.”38 Contrary to respondent’s claim, with the amendment of the Personnel
Policy, petitioner did not create a new ground for the termination of employment to make sure that
respondent is removed from his position. The quoted ground under the old policy is similar to that
provided for in the new policy. The enumeration containing the specific act of “illicit marital affairs” is
not an additional ground, but an example of an act that brings discredit to the cooperative. It is
merely an interpretation of what petitioner considers as such.  It is, thus, clear from the foregoing
that engaging in extra-marital affairs is a ground for termination of employment not only under the
new but even under the old Personnel Policy of petitioner. The effectivity of the policy as to
respondent cannot, therefore, be questioned.

To be sure, an employer is free to regulate all aspects of employment.39 It may make reasonable
rules and regulations for the government of its employees which become part of the contract of
employment provided they are made known to the employee.40 In the event of a violation, an
employee may be validly terminated from employment on the ground that an employer cannot
rationally be expected to retain the employment of a person whose lack of morals, respect and
loyalty to his employer, regard for his employer’s rules and application of the dignity and
responsibility, has so plainly and completely been bared.41

Applying now the above-discussed ground for termination, we now determine whether respondent
was properly dismissed from employment. In other words, did petitioner adequately prove that
respondent indeed engaged in extra-marital affairs, an act which petitioner considers as would bring
discredit to the cooperative?

We answer in the affirmative.

The employer’s evidence consists of sworn statements of either relatives or friends of Thelma and
respondent. They either had direct personal knowledge of the illicit relationship or revealed
circumstances indicating the existence of such relationship. As aptly observed by the LA:

x x x  Moreover, the credibility of the persons who bore witness against him can hardly be questioned
because some of these persons are relatives or friends of either [respondent] or his lover. In
particular, it is hard to see how Napoleon Gao-ay, the brother of his lover, Thelma, could have
resorted to a lie just to destroy him when the same scandal could also result in tarnishing the
reputation of his own family. The motive of Napoleon in bringing the matter to the attention of the
Board of Directors, after all, was based on ethical grounds – he wanted a stop to the affair because it
was a disgrace to the community.

There is also no reason to doubt the statement of Melanie Gao-ay, the wife of Napoleon, who
witnessed the embarrassing “encounter”, to borrow the term she used, between [respondent] and
Thelma in her own boarding house.42

While respondent’s act of engaging in extra--marital affairs may be considered personal to him and
Labor II – 1
does not directly affect the performance of his assigned task as bookkeeper, aside from the fact that
the act was specifically provided for by petitioner’s Personnel Policy as one of the grounds for
termination of employment, said act raised concerns to petitioner as the Board received numerous
complaints and petitions from the cooperative members themselves asking for the removal of
respondent because of his immoral conduct.43

The next question is whether procedural due process was observed in the termination of respondent’s
services. “Before the services of an employee can be validly terminated, the employer must furnish
him two written notices: (a) a written notice served on the employee specifying the ground or
grounds for termination, and giving the employee reasonable opportunity to explain his side; and (b)
a written notice of termination served on the employee indicating that upon due consideration of all
the circumstances, grounds have been established to justify his termination.”44 The employer must
inform the employee of the charges against him and to hear his defenses. A full adversarial
proceeding is not necessary as the parties may be heard through pleadings, written explanations,
position papers, memorandum or oral argument.45

In this case, respondent was adequately afforded the opportunity to defend himself and explain the
accusation against him. Upon receipt of the complaint, petitioner conducted a preliminary
investigation and even created an Ad Hoc Committee to investigate the matter. Respondent was
directed to explain either in writing or by a personal confrontation with the Board why he should not
be terminated for engaging in illicit affair.46 Not only did petitioner give him the opportunity but
respondent in fact informed petitioner that he opted to present his side orally47 and did so as
promised when he specifically denied such allegations before the AdHoc Committee.48 Moreover,
respondent was also allowed to peruse the investigation report prepared by the Ad Hoc Committee
and was advised that he was entitled to assistance of counsel.49 Afterwhich, hearing was conducted.
It was only after thorough investigation and proper notice and hearing to respondent that petitioner
decided whether to dismiss the former or not. The decision to terminate respondent from
employment was embodied in Board Resolution No. 05, series of 1997 a copy of which was furnished
respondent.50 With this resolution, respondent was adequately notified of petitioner’s decision to
remove him from his position. Respondent cannot now claim that his right to due process was
infringed upon.

WHEREFORE, premises considered, the petition is hereby GRANTED. The Court of Appeals Decision
dated January 16, 2006 and Resolution dated July 5, 2006 in CA-G.R. SP No. 64554, are SET
ASIDE. The Labor Arbiter’s Decision dated April 30, 1998 in NLRC Case No. RAB-I-08-1144-97 (IS)
dismissing respondent Salvador M. Bandiola, Jr.’s complaint against petitioner Alilem Credit
Cooperative, Inc., is REINSTATED.

Labor II – 1
 17.) G.R. No. 172044 : February 06, 2013

CAVITE APPAREL, INCORPORATED and ADRIANO TIMOTEO, Petitioners, v. MICHELLE

MARQUEZ, Respondent.

DECISION

BRION, J.:

We resolve the petition for review on certiorari1filed by petitioners Cavite Apparel, Incorporated
(Cavite Apparel)  and Adriano Timoteo to nullify the decision2 dated January 23, 2006 and the
resolution3 dated March 23, 2006 of the Court of Appeals (CA) in C.A.-G.R. SP No. 89819 insofar as it
affirmed the disposition4 of the National Labor Relations Commission (NLRC)  in NLRC CA  No.
029726-01. The NLRC set aside the decision5 of Labor Arbiter (LA) Cresencio G. Ramos in NLRC NCR
Case No. RAB-IV-7-12613-00-C dismissing the complaint for illegal dismissal filed by respondent
Michelle Marquez against the petitioners.

The Factual Antecedents

Cavite Apparel is a domestic corporation engaged in the manufacture of garments for export. On
August 22, 1994, it hired Michelle as a regular employee in its Finishing Department. Michelle
enjoyed, among other benefits, vacation and sick leaves of seven (7) days each per annum. Prior to
her dismissal on June 8, 2000, Michelle committed the following infractions (with their corresponding
penalties):cralawlibrary

a. First Offense: Absence without leave (AWOL) on December 6, 1999 written warning

b. Second Offense: AWOL on January 12, 2000 stern warning with three (3) days suspension

c. Third Offense: AWOL on April 27, 2000 suspension for six (6) days.6   ?r?l1 ???ñr?bl?š  ??r†??l  l?? l?br?rÿ

On May 8, 2000, Michelle got sick and did not report for work. When she returned, she submitted a
medical certificate. Cavite Apparel, however, denied receipt of the certificate.7 Michelle did not report
for work on May 15-27, 2000 due to illness. When she reported back to work, she submitted the
necessary medical certificates. Nonetheless, Cavite Apparel suspended Michelle for six (6) days (June
1-7, 2000). When Michelle returned on June 8, 2000, Cavite Apparel terminated her employment for
habitual absenteeism.

On July 4, 2000, Michelle filed a complaint for illegal dismissal with prayer for reinstatement,
backwages and attorneys fees with the NLRC, Regional Arbitration Branch No. IV.

The LA Ruling

In a decision dated April 28, 2001,8 LA Ramos dismissed the complaint. He noted that punctuality
and good attendance are required of employees in the companys Finishing Department. For this
reason, LA Ramos considered Michelles four absences without official leave as habitual and
constitutive of gross neglect of duty, a just ground for termination of employment. LA Ramos also
declared that due process had been observed in Michelles dismissal, noting that in each of her
absences, Cavite Apparel afforded Michelle an opportunity to explain her side and dismissed her only
after her fourth absence. LA Ramos concluded that Michelles dismissal was valid.9 ?r?l1

The NLRC Decision

Labor II – 1
On appeal by Michelle, the NLRC referred the case to Executive LA Vito C. Bose for review, hearing
and report.10 Adopting LA Boses report, the NLRC rendered a decision11 dated May 7, 2003 reversing
LA Ramos decision. The NLRC noted that for Michelles first three absences, she had already been
penalized ranging from a written warning to six days suspension. These, the NLRC declared, should
have precluded Cavite Apparel from using Michelles past absences as bases to impose on her the
penalty of dismissal, considering her six years of service with the company. It likewise considered the
penalty of dismissal too severe. The NLRC thus concluded that Michelle had been illegally dismissed
and ordered her reinstatement with backwages.12 When the NLRC denied Cavite Apparels motion for
reconsideration in a resolution13 dated March 30, 2005, Cavite Apparel filed a petition
for certiorari  with the CA to assail the NLRC ruling.

The CA Ruling

Cavite Apparel charged the NLRC with grave abuse of discretion when it set aside the LAs findings
and ordered Michelles reinstatement. It disagreed with the NLRCs opinion that Michells past
infractions could no longer be used to justify her dismissal since these infractions had already been
penalized and the corresponding penalties had been imposed.

The CA found no grave abuse of discretion on the part of the NLRC and accordingly dismissed Cavite
Apparels petition on January 23, 2006.14 While it agreed that habitual absenteeism without official
leave, in violation of company rules, is sufficient reason to dismiss an employee, it nevertheless did
not consider Michelles four absences as habitual. It especially noted that Michelle submitted a
medical certificate for her May 8, 2000 absence, and thus disregarded Cavite Apparels contrary
assertion. The CA explained that Michelles failure to attach a copy of the medical certificate in her
initiatory pleading did not disprove her claim.

The CA agreed with the NLRC that since Cavite Apparel had already penalized Michelle for her three
prior absences, to dismiss her for the same infractions and for her May 8, 2000 absence was unjust.
Citing jurisprudence, The CA concluded that her dismissal was too harsh, considering her six years of
employment with Cavite Apparel; it was also a disproportionate penalty as her fourth infraction
appeared excusable.

In its March 23, 2006 resolution,15 the CA denied Cavite Apparels motion for reconsideration; hence,
Cavite Apparels present recourse.

The Petition

Cavite Apparel imputes grave abuse of discretion against the CA when: cralawlibrary

1. it did not find that the NLRC committed grave abuse of disretion in setting aside the decision of the
CA;

2. it failed to consider Michelles four (4) AWOLs over a period of six months, from December 1999 to
May 2000, habitual; and

3. it ruled that the series of violations of company rules committed by Michelle were already meted
with the corresponding penalties.16  
?r?l1 ???ñr?bl?š  ??r†??l  l?? l?br?rÿ

Cavite Apparel argues that it is its prerogative to discipline its employees. It thus maintains that
when Michelle, in patent violation of the companys rules of discipline, deliberately, habitually, and
without prior authorization and despite warning did not report for work on May 8, 2000, she
committed serious misconduct and gross neglect of duty. It submits that dismissal for violation of
company rules and regulations is a dismissal for cause as the Court stressed in Northern Motors,
Inc., v. National Labor Union, et al.17 ?r?l1

Labor II – 1
 The Case for the Respondent

Michelle asserts that her dismissal was arbitrary and unreasonable. For one, she had only four
absences in her six (6) years of employment with Cavite Apparel. She explains that her absence on
May 8, 2000 was justified as she was sick and had sick leave benefits against which Cavite Apparel
could have charged her absences. Also, it had already sanctioned her for the three prior infractions.
Under the circumstances, the penalty of dismissal for her fourth infraction was very harsh. Finally, as
the CA correctly noted, Cavite Apparel terminated her services on the fourth infraction, without
affording her prior opportunity to explain.

The Courts Ruling

The case poses for us the issue of whether the CA correctly found no grave abuse of discretion when
the NLRC ruled that Cavite Apparel illegally terminated Michelles employment.

We stress at the outset that, as a rule, the Court does not review questions of fact, but only
questions of law in an appeal by certiorari under Rule 45 of the Rules of Court.18 The Court is not a
trier of facts and will not review the factual findings of the lower tribunals as these are generally
binding and conclusive.19 The rule though is not absolute as the Court may review the facts in labor
cases where the findings of the CA and of the labor tribunals are contradictory.20 Given the factual
backdrop of this case, we find sufficient basis for a review as the factual findings of the LA, on the
one hand, and those of the CA and the NLRC, on the other hand, are conflicting.

After a careful review of the merits of the case, particularly the evidence adduced, we find no
reversible error committed by the CA when it found no grave abuse of discretion in the NLRC ruling
that Michelle had been illegally dismissed.

Michelles four absences were not habitual; "totality of infractions" doctrine not applicable

Cavite Apparel argues that Michelles penchant for incurring unauthorized and unexcused absences
despite its warning constituted gross and habitual neglect of duty prejudicial to its business
operations. It insists that by going on absence without official leave four times, Michelle disregarded
company rules and regulations; if condoned, these violations would render the rules ineffectual and
would erode employee discipline.

Cavite Apparel disputes the CAs conclusion that Michelles four absences without official leave were
not habitual since she was able to submit a medical certificate for her May 8, 2000 absence. It
asserts that, on the contrary, no evidence exists on record to support this conclusion. It maintains
that it was in the exercise of its management prerogative that it dismissed Michelle; thus, it is not
barred from dismissing her for her fourth offense, although it may have previously punished her for
the first three offenses. Citing the Courts ruling in Mendoza v. NLRC,21 it contends that the totality of
Michelles infractions justifies her dismissal.

We disagree and accordingly consider the companys position unmeritorious.

Neglect of duty, to be a ground for dismissal under Article 282 of the Labor Code, must be
both gross and habitual.22 Gross negligence implies want of care in the performance of ones
duties. Habitual neglect imparts repeated failure to perform ones duties for a period of
time, depending on the circumstances.23 Under these standards and the circumstances obtaining
in the case, we agree with the CA that Michelle is not guilty of gross and habitual neglect of duties.

Cavite Apparel faults the CA for giving credit to Michelles argument that she submitted a medical
certificate to support her absence on May 8, 2000; there was in fact no such submission, except for
her bare allegations. It thus argues that the CA erred in holding that since doubt exists between the
Labor II – 1
evidence presented by the employee and that presented by the employer, the doubt should be
resolved in favor of the employee. The principle, it contends, finds no application in this case as
Michelle never presented a copy of the medical certificate. It insists that there was no evidence on
record supporting Michelles claim, thereby removing the doubt on her being on absence without
official leave for the fourth time, an infraction punishable with dismissal under the company rules and
regulations.

Cavite Apparels position fails to convince us. Based on what we see in the records, there simply
cannot be a case of gross and habitual neglect of duty against Michelle. Even assuming that she
failed to present a medical certificate for her sick leave on May 8, 2000, the records are bereft of any
indication that apart from the four occasions when she did not report for work, Michelle had been
cited for any infraction since she started her employment with the company in 1994. Four absences
in her six years of service, to our mind, cannot be considered gross and habitual neglect of
duty, especially so since the absences were spread out over a six-month period.

Michelles penalty of dismissal too harsh or not proportionate to the infractions she
commited

Although Michelle was fully aware of the company rules regarding leaves of absence, and her
dismissal might have been in accordance with the rules, it is well to stress that we are not bound by
such rules. In Caltex Refinery Employees Association v. NLRC24 and in the subsequent case
of Gutierrez v. Singer Sewing Machine Company, 25 we held that "[e]ven when there exist some rules
agreed upon between the employer and employee on the subject of dismissal, x x x the same cannot
preclude the State from inquiring on whether [their] rigid application would work too harshly on the
employee." This Court will not hesitate to disregard a penalty that is manifestly disproportionate to
the infraction committed.

Michelle might have been guilty of violating company rules on leaves of absence and employee
discipline, still we find the penalty of dismissal imposed on her unjustified under the circumstances.
As earlier mentioned, Michelle had been in Cavite Apparels employ for six years, with no derogatory
record other than the four absences without official leave in question, not to mention that she had
already been penalized for the first three absences, the most serious penalty being a six-day
suspension for her third absence on April 27, 2000.

While previous infractions may be used to support an employees dismissal from work in connection
with a subsequent similar offense,26 we cautioned employers in an earlier case that although they
enjoy a wide latitude of discretion in the formulation of work-related policies, rules and regulations,
their directives and the implemtation of their policies must be fair and reasonable; at the very least,
penalties must be commensurate to the offense involved and to the degree of the infraction.27 ?r?l1

As we earlier expressed, we do not consider Michelles dismissal to be commensurate to the four

absences she incurred for her six years of service with the company, even granting that she failed to
submit on time a medical certificate for her May 8, 2000 absence. We note that she again did not
report for work on May 15 to 27, 2000 due to illness. When she reported back for work, she
submitted the necessary medical certificates. The reason for her absence on May 8, 2000 due to
illness and not for her personal convenience all the more rendered her dismissal unreasonable as it is
clearly disproportionate to the infraction she committed.

Finally, we find no evidence supporting Cavite Apparels claim that Michelles absences prejudiced its
operations; there is no indication in the records of any damage it sustained because of Michelles
absences. Also, we are not convinced that allowing Michelle to remain in employment even after her
fourth absence or the imposition of a lighter penalty would result in a breakdown of discipline in the
employee ranks. What the company fails to grasp is that, given the unreasonableness of Michelles
dismissal i.e., one made after she had already been penalized for her three previous absences, with

Labor II – 1
the fourth absence imputed to illness confirming the validity of her dismissal could possibly have the
opposite effect. It could give rise to belief that the company is heavy-handed and may only give rise
to sentiments against it.

In fine, we hold that Cavite Apparel failed to discharge the burden of proving that Michelles dismissal
was for a lawful cause.28 We, therefore, find her to have been illegally dismissed.

As a final point, we reiterate that while we recognize managements prerogative to discipline its
employees, the exercise of this prerogative should at all times be reasonable and should be tempered
with compassion and understanding.29 Dismissal is the ultimate penalty that can be imposed on an
employee. Where a penalty less punitive may suffice, whatever missteps may be committed by labor
ought not to be visited with a consequence so severe for what is at stake is not merely the
employees position but his very livelihood and perhaps the life and subsistence of his family.30
?r?l1

WHEREFORE, premises considered, the petition is DENIED. The assailed January 23, 2006 decision
and March 23, 2006 resolution of the Court of Appeals in CA-G.R. SP No. 89819 are AFFIRMED. Costs
against Cavite Apparel, Incorporated.

Labor II – 1
18.) G.R. No. 173012               June 13, 2012

DOLORES T. ESGUERRA, Petitioner,
vs.
VALLE VERDE COUNTRY CLUB, INC. and ERNESTO VILLALUNA, Respondents.

DECISION

BRION, J.:

Before this Court is a petition for review on certiorari, filed by petitioner Dolores T. Esguerra (Esguerra), from the
1 

February 7, 2006 decision and the June 2, 2006 resolution of the Court of Appeals (CA) in CA-G.R. SP No. 85012,
2  3 

ruling that Esguerra had been validly dismissed from her employment with respondent Valle Verde Country Club,
Inc. (Valle Verde). Valle Verde terminated Esguerra’s employment for loss of trust and confidence in the custody of
cash sales.

FACTUAL BACKGROUND

On April 1, 1978, Valle Verde hired Esguerra as Head Food Checker. In 1999, she was promoted to Cost Control
Supervisor. 4

On January 15, 2000, the Couples for Christ held a seminar at the country club. Esguerra was tasked to oversee the
seminar held in the two function rooms – the Ballroom and the Tanay Room. The arrangement was that the food
shall be served in the form of pre-paid buffet, while the drinks shall be paid in a "pay as you order" basis.
5

The Valle Verde Management found out the following day that only the proceeds from the Tanay Room had been
remitted to the accounting department. There were also unauthorized charges of food on the account of Judge
Rodolfo Bonifacio, one of the participants. To resolve the issue, Valle Verde conducted an investigation; the
employees who were assigned in the two function rooms were summoned and made to explain, in writing, what had
transpired.6

On March 6, 2000, Valle Verde sent a memorandum to Esguerra requiring her to show cause as to why no
disciplinary action should be taken against her for the non-remittance of the Ballroom’s sales. Esguerra was placed
under preventive suspension with pay, pending investigation. 7

In her letter-response, Esguerra denied having committed any misappropriation. She explained that it had been her
daughter (who was assigned as a food checker) who lost the money. To settle the matter, Esguerra paid the
8 

unaccounted amount as soon as her daughter informed her about it. Esguerra also explained the unauthorized
charging of food on Judge Bonifacio’s account. She alleged that Judge Bonifacio took pity on her and told her to
take home some food and to charge it on his account.

Valle Verde found Esguerra’s explanation unsatisfactory and, on July 26, 2000, issued a second memorandum
terminating Esguerra’s employment. 9

THE LABOR ARBITER’S RULING

Esguerra filed a complaint with the National Labor Relations Commission (NLRC) for illegal dismissal. In her April 5,
10 

2002 decision, Labor Arbiter Marita V. Padolina dismissed the complaint for lack of merit, but ordered Valle Verde to
pay Esguerra 13th month pay in the amount of ₱2,016.66, rice subsidy in the amount of ₱1,100.00, and ten percent
(10%) attorney’s fees in the amount of ₱311.66. 11

THE NLRC’S RULING

Labor II – 1
Esguerra appealed the case to the NLRC. In its December 27, 2002 decision, the NLRC modified the decision and
12 

only awarded ₱143,000.00 as separation pay, equivalent to one-half (½) month for every year of service, after
13 

taking into account Esguerra’s long years of service and absence of previous derogatory records.

Esguerra filed a partial motion for reconsideration, while Valle Verde filed its own motion for reconsideration. In its
14  15 

March 31, 2004 resolution, the NLRC denied Esguerra’s motion, but granted Valle Verde’s motion. Thus, it set aside
its December 27, 2002 decision and affirmed the April 5, 2002 decision of the labor arbiter.

THE CA RULING

Aggrieved, Esguerra elevated her case to the CA via a Rule 65 petition for certiorari. In its February 7, 2006
decision, the CA denied Esguerra’s petition for certiorari. It found that the NLRC did not commit any grave abuse of
discretion in finding that Esguerra was validly dismissed from employment for loss of trust and confidence, and that
her length of service cannot be counted in her favor.

Esguerra filed the present petition after the CA denied her motion for reconsideration.
16  17

THE PETITION

Esguerra argues that the appellate court erred in ruling that she had been validly dismissed on the ground of loss of
trust and confidence. She alleges that she was only a regular employee and did not occupy a supervisory position
vested with trust and confidence. Esguerra also questions the manner of dismissal since Valle Verde failed to
comply with procedural requirements.

THE ISSUE

The core issue boils down to whether the CA erred in affirming the NLRC’s decision and resolution.

OUR RULING

The petition is without merit.

"Under the Labor Code, the requirements for the lawful dismissal of an employee are two-fold[:] the substantive and
the procedural aspects. Not only must the dismissal be for a just or authorized cause, the rudimentary requirements
of due process — notice and hearing — must, likewise, be observed x x x. Without the concurrence of the two, the
termination would x x x be illegal[;] employment is a property right of which one cannot be deprived of without due
process." 18

There was valid notice and hearing

We fail to find any irregularities in the service of notice to Esguerra. The memorandum dated March 6,
2000 informed her of the charges, and clearly directed her to show cause, in writing, why no disciplinary action
19 

should be imposed against her. Esguerra’s allegation that the notice was insufficient since it failed to contain any
intention to terminate her is incorrect.

In Perez v. Philippine Telegraph and Telephone Company, the Court underscored the significance of the two-notice
20 

rule in dismissing an employee:

To meet the requirements of due process in the dismissal of an employee, an employer must furnish the worker with
two written notices: (1) a written notice specifying the grounds for termination and giving to said employee a
reasonable opportunity to explain his side and (2) another written notice indicating that, upon due consideration of
all circumstances, grounds have been established to justify the employer’s decision to dismiss the
employee. [emphases and italics ours]. 21

Labor II – 1
Contrary to Esguerra’s allegation, the law does not require that an intention to terminate one’s employment should
be included in the first notice. It is enough that employees are properly apprised of the charges brought against
them so they can properly prepare their defenses; it is only during the second notice that the intention to terminate
one’s employment should be explicitly stated.

There is also no basis to question the absence of a proper hearing. In Perez, the Court provided the following
guiding principles in connection with the hearing requirement in dismissal cases:

a) "ample opportunity to be heard" means any meaningful opportunity (verbal or written) given to the
employee to answer the charges against him and submit evidence in support of his defense, whether in a
hearing, conference or some other fair, just and reasonable way.

b) a formal hearing or conference becomes mandatory only when requested by the employee in writing or
substantial evidentiary disputes exist or a company rule or practice requires it, or when similar
circumstances justify it.

c) the "ample opportunity to be heard" standard in the Labor Code prevails over the "hearing or conference"
requirement in the implementing rules and regulations. 22

In sum, the existence of an actual, formal "trial-type" hearing, although preferred, is not absolutely necessary to
satisfy the employee's right to be heard. Esguerra was able to present her defenses; and only upon proper
consideration of it did Valle Verde send the second memorandum terminating her employment. Since Valle Verde
complied with the two-notice requirement, no procedural defect exists in Esguerra’s termination.

Esguerra occupied a position of trust and confidence

We now dwell on the substantive aspect of Esguerra’s dismissal. We have held that there are two (2) classes of
positions of trust – the first class consists of managerial employees, or those vested with the power to lay down
management policies; and the second class consists of cashiers, auditors, property custodians or those who, in the
normal and routine exercise of their functions, regularly handle significant amounts of money or property.  23

Esguerra held the position of Cost Control Supervisor and had the duty to remit to the accounting
department the cash sales proceeds from every transaction she was assigned to. This is not a routine task
24 

that a regular employee may perform; it is related to the handling of business expenditures or finances. For
this reason, Esguerra occupies a position of trust and confidence – a position enumerated in the second
class of positions of trust. Any breach of the trust imposed upon her can be a valid cause for dismissal.

In Jardine Davies, Inc. v. National Labor Relations Commission, we held that loss of confidence as a just cause for
25 

termination of employment can be invoked when an employee holds a position of responsibility, trust and
confidence. In order to constitute a just cause for dismissal, the act complained of must be related to the
performance of the duties of the dismissed employee and must show that he or she is unfit to continue working for
the employer for violation of the trust reposed in him or her.

We find no merit in the allegation that it was Esguerra’s daughter who should be held liable. She had no
custody of the cash sales since it was not part of her duties as a food checker. It was Esguerra’s
responsibility to account for the cash proceeds; in case of problems, she should have promptly reported it,
regardless of who was at fault. Instead, she settled the unaccounted amount only after the accounting
department informed her about the discrepancy, almost one month following the incident. Esguerra’s
failure to make the proper report reflects on her irresponsibility in the custody of cash for which she was
accountable, it was her duty to account for the sales proceeds, and she should have known about the
missing amount immediately after the event.

We cannot favorably consider Esguerra’s explanation about the unauthorized charging on Judge Bonifacio’s
account.  It is highly unethical for an employee to bring home food intended to be sold to customers. At any rate, her
1âwphi1

explanation is self-serving and cannot be believed; the numerous written testimonies of the other co-workers never
even mentioned it.

Labor II – 1
WHEREFORE, we hereby DENY the petition for lack of merit. Costs against Dolores T. Esguerra.

Labor II – 1
 19.) G.R. No. 187226, January 28, 2015

CHERYLL SANTOS LEUS, Petitioner, v. ST. SCHOLASTICA’S COLLEGE WESTGROVE AND/OR

SR. EDNA QUIAMBAO, OSB, Respondents.

DECISION

REYES, J.:

Cheryll Santos Leus (petitioner) was hired by St. Scholastica’s College Westgrove (SSCW), a Catholic
educational institution, as a non-teaching personnel, engaged in pre-marital sexual relations, got
pregnant out of wedlock, married the father of her child, and was dismissed by SSCW, in that order.
The question that has to be resolved is whether the petitioner’s conduct constitutes a ground for her
dismissal.

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision1 dated September 24, 2008 and Resolution2 dated March 2, 2009
issued by the Court of Appeals (CA) in CA-G.R. SP No. 100188, which affirmed the Resolutions dated
February 28, 20073 and May 21, 20074 of the National Labor Relations Commission (NLRC) in NLRC
CA No. 049222-06.

The Facts

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

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

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

In a letter7 dated May 31, 2003, the petitioner explained that her pregnancy out of wedlock does not
amount to serious misconduct or conduct unbecoming of an employee. She averred that she is
unaware of any school policy stating that being pregnant out of wedlock is considered as a serious
misconduct and, thus, a ground for dismissal. Further, the petitioner requested a copy of SSCW’s
policy and guidelines so that she may better respond to the charge against her.

On June 2, 2003, Sr. Quiambao informed the petitioner that, pending the promulgation of a “Support
Staff Handbook,” SSCW follows the 1992 Manual of Regulations for Private Schools (1992
MRPS) on the causes for termination of employments; that Section 94(e) of the 1992
MRPS cites “disgraceful or immoral conduct” as a ground for dismissal in addition to the just
causes for termination of employment provided under Article 282 of the Labor Code.8 chanRoblesvirtualLawlibrary

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

Labor II – 1
To us, pre-marital sex between two consenting adults without legal impediment to marry each other
who later on married each other does not fall within the contemplation of “disgraceful or immoral
conduct” and “serious misconduct” of the Manual of Regulations for Private Schools and the Labor
Code of the Philippines.

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

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

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

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

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

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

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

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

The Ruling of the Labor Arbiter

On February 28, 2006, the Labor Arbiter (LA) rendered a Decision,16 in NLRC Case No. 6-17657-03-C
which dismissed the complaint filed by the petitioner. The LA found that there was a valid ground for
Labor II – 1
the petitioner’s dismissal; that her pregnancy out of wedlock is considered as a “disgraceful and
immoral conduct.” The LA pointed out that, as an employee of a Catholic educational institution, the
petitioner is expected to live up to the Catholic values taught by SSCW to its students. Likewise, the
LA opined that: chanroblesvirtuallawlibrary

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

The LA further held that teachers and school employees, both in their official and personal conduct,
must display exemplary behavior and act in a manner that is beyond reproach.

The petitioner appealed to the NLRC, insisting that there was no valid ground for the termination of
her employment. She maintained that her pregnancy out of wedlock cannot be considered as
“serious misconduct” under Article 282 of the Labor Code since the same was not of such a grave and
aggravated character. She asserted that SSCW did not present any evidence to establish that her
pregnancy out of wedlock indeed eroded the moral principles that it teaches its students.18 chanRoblesvirtualLawlibrary

The Ruling of the NLRC

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

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

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

The Ruling of the CA

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

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

Labor II – 1
The CA further held that the petitioner’s dismissal was a valid exercise of SSCW’s management
prerogative to discipline and impose penalties on erring employees pursuant to its policies, rules and
regulations. The CA upheld the NLRC’s conclusion that the petitioner’s pregnancy out of wedlock is
considered as a “disgraceful and immoral conduct” and, thus, a ground for dismissal under Section
94(e) of the 1992 MRPS. The CA likewise opined that the petitioner’s pregnancy out of wedlock is
scandalous per se given the work environment and social milieu that she was in, viz: chanroblesvirtuallawlibrary

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

xxxx

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

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

Finally, petitioner’s dismissal is a valid exercise of the employer-school’s management prerogative to

discipline and impose penalties on erring employees pursuant to its policies, rules and regulations. x
x x.25 (Citations omitted)

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

Hence, the instant petition.

Issues

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

The Ruling of the Court

The Court grants the petition.

First Issue: Applicability of the 1992 MRPS

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

Labor II – 1
employment, is invalid as it “widened the scope and coverage” of BP 232.

The Court does not agree.

The Court notes that the argument against the validity of the 1992 MRPS, specifically Section 94
thereof, is raised by the petitioner for the first time in the instant petition for review. Nowhere in the
proceedings before the LA, the NLRC or the CA did the petitioner assail the validity of the provisions
of the 1992 MRPS.

“It is well established that issues raised for the first time on appeal and not raised in the proceedings
in the lower court are barred by estoppel. Points of law, theories, issues, and arguments not brought
to the attention of the trial court ought not to be considered by a reviewing court, as these cannot be
raised for the first time on appeal. To consider the alleged facts and arguments belatedly raised
would amount to trampling on the basic principles of fair play, justice, and due process.”28 chanRoblesvirtualLawlibrary

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

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

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

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

Second Issue: Validity of the Petitioner’s Dismissal

The validity of the petitioner’s dismissal hinges on the determination of whether

pregnancy out of wedlock by an employee of a catholic educational institution is a cause
for the termination of her employment.

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

The standard of review in a Rule 45

petition from the CA decision in labor
Labor II – 1
cases.

In a petition for review under Rule 45 of the Rules of Court, such as the instant petition, where the
CA’s disposition in a labor case is sought to be calibrated, the Court’s review is quite limited. In ruling
for legal correctness, the Court has to view the CA decision in the same context that the petition
for certiorari it ruled upon was presented to it; the Court has to examine the CA decision from the
prism of whether it correctly determined the presence or absence of grave abuse of discretion in the
NLRC decision before it, not on the basis of whether the NLRC decision on the merits of the case was
correct.33chanRoblesvirtualLawlibrary

The phrase “grave abuse of discretion” is well-defined in the Court’s jurisprudence. It exists where an
act of a court or tribunal is performed with a capricious or whimsical exercise of judgment equivalent
to lack of jurisdiction.34 The determination of the presence or absence of grave abuse of discretion
does not include an inquiry into the correctness of the evaluation of evidence, which was the basis of
the labor agency in reaching its conclusion.35 chanRoblesvirtualLawlibrary

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

The labor tribunals’ respective

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

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

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

xxxx

e. Disgraceful or immoral conduct;

xxxx

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

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

The totality of the circumstances

Labor II – 1
surrounding the conduct alleged to be
disgraceful or immoral must be assessed
against the prevailing norms of conduct.

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

Thus, the determination of whether a conduct is disgraceful or immoral involves a two-step

process: first, a consideration of the totality of the circumstances surrounding the conduct;
and second, an assessment of the said circumstances vis-à-vis  the prevailing norms of
conduct, i.e., what the society generally considers moral and respectable.

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

Public and secular morality should

determine the prevailing norms of conduct,
not religious morality. 

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

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

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

Labor II – 1
In other words, government action, including its proscription of immorality as expressed in
criminal law like concubinage, must have a secular purpose. That is, the government
proscribes this conduct because it is “detrimental (or dangerous) to those conditions upon
which depend the existence and progress of human society” and not because the conduct
is proscribed by the beliefs of one religion or the other. Although admittedly, moral judgments
based on religion might have a compelling influence on those engaged in public deliberations over
what actions would be considered a moral disapprobation punishable by law. After all, they might
also be adherents of a religion and thus have religious opinions and moral codes with a compelling
influence on them; the human mind endeavors to regulate the temporal and spiritual institutions of
society in a uniform manner, harmonizing earth with heaven. Succinctly put, a law could be
religious or Kantian or Aquinian or utilitarian in its deepest roots, but it must have an
articulable and discernible secular purpose and justification to pass scrutiny of the religion
clauses. x x x.42 (Citations omitted and emphases ours)

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

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

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

(1) if the father of the child is himself unmarried, the woman is not ordinarily administratively liable for
disgraceful and immoral conduct. It may be a not-so-ideal situation and may cause complications for both
mother and child but it does not give cause for administrative sanction. There is no law which penalizes
an unmarried mother under those circumstances by reason of her sexual conduct or proscribes the
consensual sexual activity between two unmarried persons. Neither does the situation contravene any
fundamental state policy as expressed in the Constitution, a document that accommodates various
belief systems irrespective of dogmatic origins.
(2) if the father of the child born out of wedlock is himself married to a woman other than the mother,
then there is a cause for administrative sanction against either the father or the mother. In such a
case, the “disgraceful and immoral conduct” consists of having extramarital relations with a married
person. The sanctity of marriage is constitutionally recognized and likewise affirmed by our statutes as a
special contract of permanent union. Accordingly, judicial employees have been sanctioned for their
dalliances with married persons or for their own betrayals of the marital vow of fidelity.

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

Both Estrada and Radam are administrative cases against employees in the civil service. The Court,
however, sees no reason not to apply the doctrines enunciated in Estrada  and Radam in the instant
case. Estrada  and Radam also required the Court to delineate what conducts are considered
Labor II – 1
disgraceful and/or immoral as would constitute a ground for dismissal. More importantly, as in the
said administrative cases, the instant case involves an employee’s security of tenure; this case
likewise concerns employment, which is not merely a specie of property right, but also the means by
which the employee and those who depend on him live.45 chanRoblesvirtualLawlibrary

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

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

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

The petitioner’s pregnancy out of

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

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

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

To stress, pre-marital sexual relations between two consenting adults who have no impediment to
marry each other, and, consequently, conceiving a child out of wedlock, gauged from a purely public
and secular view of morality, does not amount to a disgraceful or immoral conduct under Section
Labor II – 1
94(e) of the 1992 MRPS.

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

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

There is no substantial evidence to

prove that the petitioner’s pregnancy out of
wedlock caused grave scandal to SSCW
and its students.

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

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

On the other hand, the NLRC opined that: chanroblesvirtuallawlibrary

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

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

Settled is the rule that in termination cases, the burden of proving that the dismissal of the
employees was for a valid and authorized cause rests on the employer. It is incumbent upon the
employer to show by substantial evidence that the termination of the employment of the employees
was validly made and failure to discharge that duty would mean that the dismissal is not justified and
Labor II – 1
therefore illegal.50 “Substantial evidence is more than a mere scintilla of evidence. It means such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if
other minds equally reasonable might conceivably opine otherwise.”51 chanRoblesvirtualLawlibrary

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

The petitioner’s dismissal is not a

valid exercise of SSCW’s management
prerogative.

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

The Court does not agree.

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

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

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

The petitioner is entitled to

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

Having established that the petitioner was illegally dismissed, the Court now determines the reliefs
Labor II – 1
that she is entitled to and their extent. Under the law and prevailing jurisprudence, “an illegally
dismissed employee is entitled to reinstatement as a matter of right.”54 Aside from the instances
provided under Articles 28355 and 28456 of the Labor Code, separation pay is, however, granted when
reinstatement is no longer feasible because of strained relations between the employer and the
employee. In cases of illegal dismissal, the accepted doctrine is that separation pay is available in
lieu of reinstatement when the latter recourse is no longer practical or in the best interest of the
parties.57
chanRoblesvirtualLawlibrary

In Divine Word High School v. NLRC,58 the Court ordered the employer Catholic school to pay the
illegally dismissed high school teacher separation pay in lieu of actual reinstatement since her
continued presence as a teacher in the school “may well be met with antipathy and antagonism by
some sectors in the school community.”59 chanRoblesvirtualLawlibrary

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

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

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

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

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

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

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

Finally, legal interest shall be imposed on the monetary awards herein granted at the rate of six
Labor II – 1
percent (6%) per annum from the finality of this judgment until fully paid.69 chanRoblesvirtualLawlibrarychanrobleslaw

WHEREFORE, in consideration of the foregoing disquisitions, the petition is GRANTED. The Decision

dated September 24, 2008 and Resolution dated March 2, 2009 of the Court of Appeals in CA-G.R.
SP No. 100188 are hereby REVERSED and SET ASIDE.

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

Labor II – 1
20.) G.R. No. 187417

CHRISTINE JOY CAPIN-CADIZ, Petitioner,

vs.
BRENT HOSPITAL AND COLLEGES, INC., Respondent.

DECISION

REYES, J.:

This is a petition for review on certiorari  under Rule 45 of the Rules of Court assailing the Resolutions dated July
1

22, 2008  and February 24, 2009  of the Court of Appeals (CA) in CA-GR. SP No. 02373-MIN, which dismissed the
2 3

petition filed by petitioner Christine Joy Capin-Cadiz (Cadiz) on the following grounds: (1) incomplete statement of
material dates; (2) failure to attach registry receipts; and (3) failure to indicate the place of issue of counsel's
Professional Tax Receipt (PTR) and Integrated Bar of the Philippines (IBP) official receipts.

Antecedent Facts

Cadiz was the Human Resource Officer of respondent Brent Hospital and Colleges, Inc. (Brent) at the time of her
indefinite suspension from employment in 2006. The cause of suspension was Cadiz's Unprofessionalism and
Unethical Behavior Resulting to Unwed Pregnancy. It appears that Cadiz became pregnant out of wedlock, and
Brent imposed the suspension until such time that she marries her boyfriend in accordance with law.

Cadiz then filed with the Labor Arbiter (LA) a complaint for Unfair Labor Practice, Constructive Dismissal, Non-
Payment of Wages and Damages with prayer for Reinstatement. 4

Ruling of the Labor Tribunals

In its Decision  dated April 12, 2007, the LA found that Cadiz's indefinite suspension amounted to a constructive
5

dismissal; nevertheless, the LA ruled that Cadiz was not illegally dismissed as there was just cause for her
dismissal, that is, she engaged in premarital sexual relations with her boyfriend resulting in a pregnancy out of
wedlock.   The LA further stated that her "immoral conduct x x x [was] magnified as serious misconduct not only by
6

her getting pregnant as a result thereof before and without marriage, but more than that, also by the fact that Brent
is an institution of the Episcopal Church in the Philippines operating both a hospital and college where [Cadiz] was
employed."  The LA also ruled that she was not entitled to reinstatement "at least until she marries her boyfriend," to
7

backwages and vacation/sick leave pay. Brent, however, manifested that it was willing to pay her 13th month pay.
The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered, ordering [Brent] to pay [Cadiz] 13th month pay in the sum of Seven
Thousand Nine Hundred Seventy & 11/100 Pesos (P7,970.11).

All other charges and claims are hereby dismissed for lack of merit.

SO ORDERED. 8

Cadiz appealed to the National Labor Relations Commission (NLRC), which affirmed the LA decision in its
Resolution  dated December 10, 2007. Her motion for reconsideration having been denied by the NLRC in its
9

Resolution  dated February 29, 2008, Cadiz elevated her case to the CA on petition for certiorari under Rule 65.
10

Ruling of the CA

The CA, however, dismissed her petition outright due to technical defects in the petition: (1) incomplete statement of
material dates; (2) failure to attach registry receipts; and (3) failure to indicate the place of issue of counsel's PTR
and IBP official receipts.   Cadiz sought reconsideration of the assailed CA Resolution dated July 22, 2008 but it
11

Labor II – 1
was denied in the assailed Resolution dated February 24, 2009.   The CA further ruled that "a perusal of the petition
12

will reveal that public respondent NLRC committed no grave abuse of discretion amounting to lack or excess of
jurisdiction x x x holding [Cadiz's] dismissal from employment valid." 13

Hence, the present petition.

Cadiz argues that -

THE HONORABLE [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT HELD THAT [CADIZ'S]
IMPREGNATION OUTSIDE OF WEDLOCK IS A GROUND FOR THE TERMINATION OF [CADIZ'S]
EMPLOYMENT 14

II

THE [NLRC] COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT UPHELD THE DISMISSAL OF [CADIZ]
ON THE GROUND THAT THE INDEFINITE SUSPENSION WAS VALID AND REQUIRED [CADIZ] TO FIRST
ENTER INTO MARRIAGE BEFORE SHE CAN BE ADMITTED BACK TO HER EMPLOYMENT 15

III

RESPONDENT [NLRC] GRAVELY ABUSED ITS DISCRETION WHEN IT DENIED [CADIZ'S] CLAIM FOR
BACKWAGES, ALLOWANCES, SICK LEAVE PAY, MATERNITY PAY AND MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY'S FEES  16

IV

THE [CA] MISPLACED APPLICATION OF THE MATERIAL DATA RULE RESULTING TO GRAVE ABUSE OF
DISCRETION WHEN IT DISMISSED THE APPEAL 17

Cadiz contends, among others, that getting pregnant outside of wedlock is not grossly immoral, especially
when both partners do not have any legal impediment to marry. Cadiz surmises that the reason for her
suspension was not because of her relationship with her then boyfriend but because of the resulting pregnancy.
Cadiz also lambasts Brent's condition for her reinstatement - that she gets married to her boyfriend - saying that this
violates the stipulation against marriage under Article 136 of the Labor Code. Finally, Cadiz contends that there was
substantial compliance with the rules of procedure, and the CA should not have dismissed the petition.  18

Brent, meanwhile, adopts and reiterates its position before the LA and the NLRC that Cadiz's arguments are
irrational and out of context. Brent argues, among others, that for Cadiz to limit acts of immorality only to extra-
marital affairs is to "change the norms, beliefs, teachings and practices of BRENT as a Church institution of the x x x
Episcopal Church in the Philippines." 19

Ruling of the Court

Ordinarily, the Court will simply gloss over the arguments raised by Cadiz, given that the main matter dealt with by
the CA were the infirmities found in the petition and which caused the dismissal of her case before it. In view,
however, of the significance of the issues involved in Cadiz's dismissal from employment, the Court will resolve the
petition including the substantial grounds raised herein.

The issue to be resolved is whether the CA committed a reversible error in ruling that: (1) Cadiz's petition is
dismissible on ground of technical deficiencies; and (2) the NLRC did not commit grave abuse of discretion in
upholding her dismissal from employment.

Labor II – 1
Rules of procedure are mere tools
designed to facilitate the attainment
of justice

In dismissing outright Cadiz's petition, the CA found the following defects: (1) incomplete statement of material
dates; (2) failure to attach registry receipts; and (3) failure to indicate the place of issue of counsel's PTR and IBP
official receipts.

Rule 46, Section 3 of the Rules of Court states the contents of a petition filed with the CA under Rule 65, viz, "the
petition shall x x x indicate the material dates showing when notice of the judgment or final order or resolution
subject thereof was received, when a motion for new trial or reconsideration, if any, was filed and when notice of the
denial thereof was received." The rationale for this is to enable the CA to determine whether the petition was filed
within the period fixed in the rules.   Cadiz's failure to state the date of receipt of the copy of the NLRC decision,
20

however, is not fatal to her case since the more important material date which must be duly alleged in a petition is
the date of receipt of the resolution of denial of the motion for reconsideration,  which she has duly complied with. 
21 22

The CA also dismissed the petition for failure to attach the registry receipt in the affidavit of service.  Cadiz points
23

out, on the other hand, that the registry receipt number was indicated in the petition and this constitutes substantial
compliance with the requirement. What the rule requires, however, is that the registry receipt must be appended to
the paper being served.  Clearly, mere indication of the registry receipt numbers will not suffice. In fact, the absence
24

of the registry receipts amounts to lack of proof of service.  Nevertheless, despite this defect, the Court finds that
25

the ends of substantial justice would be better served by relaxing the application of technical rules of
procedure.   With regard to counsel's failure to indicate the place where the IBP and PTR receipts were issued,
26

there was substantial compliance with the requirement since it was indicated in the verification and certification of
non-forum shopping, as correctly argued by Cadiz's lawyer.  27

Time and again, the Court has emphasized that rules of procedure are designed to secure substantial justice. These
are mere tools to expedite the decision or resolution of cases and if their strict and rigid application would frustrate
rather than promote substantial justice, then it must be avoided. 28

Immorality as a just cause for

termination of employment

Both the LA and the NLRC upheld Cadiz's dismissal as one attended with just cause. The LA, while ruling that
Cadiz's indefinite suspension was tantamount to a constructive dismissal, nevertheless found that there was just
cause for her dismissal. According to the LA, "there was just cause therefor, consisting in her engaging in premarital
sexual relations with Carl Cadiz, allegedly her boyfriend, resulting in her becoming pregnant out of wedlock."  The
29

LA deemed said act to be immoral, which was punishable by dismissal under Brent's rules and which likewise
constituted serious misconduct under Article 282(a) of the Labor Code. The LA also opined that since Cadiz was
Brent's Human Resource Officer in charge of implementing its rules against immoral conduct, she should have been
the "epitome of proper conduct."  The LA ruled:
30

[Cadiz's] immoral conduct by having premarital sexual relations with her alleged boy friend, a former Brent worker
and her co-employee, is magnified as serious misconduct not only by her getting pregnant as a result thereof before
and without marriage, but more than that, also by the fact that Brent is an institution of the Episcopal Church in the
Philippines x x x committed to "developing competent and dedicated professionals x x x and in providing excellent
medical and other health services to the community for the Glory of God and Service to Humanity." x x x As if these
were not enough, [Cadiz] was Brent's Human Resource Officer charged with, among others, implementing the rules
of Brent against immoral conduct, including premarital sexual relations, or fornication x x x. She should have been
the epitome of proper conduct, but miserably failed. She herself engaged in premarital sexual relations, which surely
scandalized the Brent community.xx x. 31

The NLRC, for its part, sustained the LA's conclusion.

The Court, however, cannot subscribe to the labor tribunals' conclusions.

Labor II – 1
Admittedly, one of the grounds for disciplinary action under Brent's policies is immorality, which is punishable by
dismissal at first offense.  Brent's Policy Manual provides:
32

CATEGORY IV

In accordance with Republic Act No. 1052,  the following are just cause for terminating an employment of an
33

employee without a definite period:

xxxx

2. Serious misconduct or willful disobedience by the employee of the orders of his employer or representative in
connection with his work, such as, but not limited to the following:

xxxx

b. Commission of immoral conduct or indecency within the company premises, such as an act of lasciviousness or
any act which is sinful and vulgar in nature.

c. Immora1ity, concubinage, bigamy.  34

Its Employee's Manual of Policies, meanwhile, enumerates "[a]cts of immorality such as scandalous behaviour, acts
of lasciviousness against any person (patient, visitors, co-workers) within hospital premises"  as a ground for
35

discipline and discharge. Brent also relied on Section 94 of the Manual of Regulations for Private Schools (MRPS),
which lists "disgraceful or immoral conduct" as a cause for terminating employment.  36

Thus, the question that must be resolved is whether Cadiz's premarital relations with her boyfriend and the resulting
pregnancy out of wedlock constitute immorality. To resolve this, the Court makes reference to the recently
promulgated case of Cheryll Santos Leus v. St. Scholastica’s College Westgrove and/or Sr. Edna Quiambao, OSB. 37

Leus involved the same personal circumstances as the case at bench, albeit the employer was a Catholic and
sectarian educational institution and the petitioner, Cheryll Santos Leus (Leus ), worked as an assistant to the
school's Director of the Lay Apostolate and Community Outreach Directorate. Leus was dismissed from employment
by the school for having borne a child out of wedlock. The Court ruled in Leus that the determination of whether a
conduct is disgraceful or immoral involves a two-step process: first, a consideration of the totality of the
circumstances surrounding the conduct; and second, an assessment of the said circumstances vis-a-vis the
prevailing norms of conduct, i.e., what the society generally considers moral and respectable.

In this case, the surrounding facts leading to Cadiz's dismissal are straightforward - she was employed as a human
resources officer in an educational and medical institution of the Episcopal Church of the Philippines; she and her
boyfriend at that time were both single; they engaged in premarital sexual relations, which resulted into pregnancy.
The labor tribunals characterized these as constituting disgraceful or immoral conduct. They also sweepingly
concluded that as Human Resource Officer, Cadiz should have been the epitome of proper conduct and her
indiscretion "surely scandalized the Brent community." 38

The foregoing circumstances, however, do not readily equate to disgraceful and immoral conduct. Brent's Policy
Manual and Employee's Manual of Policies do not define what constitutes immorality; it simply stated immorality as
a ground for disciplinary action. Instead, Brent erroneously relied on the standard dictionary definition of fornication
as a form of illicit relation and proceeded to conclude that Cadiz's acts fell under such classification, thus
constituting immorality. 
39

Jurisprudence has already set the standard of morality with which an act should be gauged - it is public and secular,
not religious.   Whether a conduct is considered disgraceful or immoral should be made in accordance with the
40

prevailing norms of conduct, which, as stated in Leus, refer to those conducts which are proscribed because they
are detrimental to conditions upon which depend the existence and progress of human society. The fact that
a particular act does not conform to the traditional moral views of a certain sectarian institution is not sufficient
reason to qualify such act as immoral unless it, likewise, does not conform to public and secular standards. More
Labor II – 1
importantly, there must be substantial evidence to establish that premarital sexual relations and pregnancy out of
wedlock is considered disgraceful or immoral. 41

The totality of the circumstances of this case does not justify the conclusion that Cadiz committed acts of immorality.
Similar to Leus, Cadiz and her boyfriend were both single and had no legal impediment to marry at the time she
committed the alleged immoral conduct. In fact, they eventually married on April 15, 2008.  Aside from these, the
42

labor tribunals' respective conclusion that Cadiz's "indiscretion" "scandalized the Brent community" is speculative, at
most, and there is no proof adduced by Brent to support such sweeping conclusion. Even Brent admitted that it
came to know of Cadiz's "situation" only when her pregnancy became manifest.  Brent also conceded that "[a]t the
43

time [Cadiz] and Carl R. Cadiz were just carrying on their boyfriend-girlfriend relationship, there was no knowledge
or evidence by [Brent] that they were engaged also in premarital sex."  This only goes to show that Cadiz did not
44

flaunt her premarital relations with her boyfriend and it was not carried on under scandalous or disgraceful
circumstances. As declared in Leus, "there is no law which penalizes an unmarried mother by reason of her sexual
conduct or proscribes the consensual sexual activity between two unmarried persons; that neither does such
situation contravene[s] any fundamental state policy enshrined in the Constitution. "  The fact that Brent is a
45

sectarian institution does not automatically subject Cadiz to its religious standard of morality absent an express
statement in its manual of personnel policy and regulations, prescribing such religious standard as gauge as these
regulations create the obligation on both the employee and the employer to abide by the same.  46

Brent, likewise, cannot resort to the MRPS because the Court already stressed in Leus that "premarital sexual
relations between two consenting adults who have no impediment to marry each other, and, consequently,
conceiving a child out of wedlock, gauged from a purely public and secular view of morality, does not amount to a
disgraceful or immoral conduct under Section 94(e) of the 1992 MRPS." 47

Marriage as a condition for

reinstatement

The doctrine of management prerogative gives an employer the right to "regulate, according to his own discretion
and judgment, all aspects of employment, including hiring, work assignments, working methods, the time, place and
manner of work, work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of
employees."  In this case, Brent imposed on Cadiz the condition that she subsequently contract marriage with her
48

then boyfriend for her to be reinstated. According to Brent, this is "in consonance with the policy against
encouraging illicit or common-law relations that would subvert the sacrament of marriage." 49

Statutory law is replete with legislation protecting labor and promoting equal opportunity in employment. No less
than the 1987 Constitution mandates that the "State shall afford full protection to labor, local and overseas,
organized and unorganized, and promote full employment and equality of employment opportunities for all."  The 50

Labor Code of the Philippines, meanwhile, provides:

Art. 136. Stipulation against marriage. It shall be unlawful for an employer to require as a condition of employment or
continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that
upon getting married, a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge,
discriminate or otherwise prejudice a woman employee merely by reason of her marriage.

With particular regard to women, Republic Act No. 9710 or the Magna Carta of Women  protects women against
51

discrimination in all matters relating to marriage and family relations, including the right to choose freely a spouse
and to enter into marriage only with their free and full consent. 52

Weighed against these safeguards, it becomes apparent that Brent's condition is coercive, oppressive and
discriminatory. There is no rhyme or reason for it.  It forces Cadiz to marry for economic reasons and deprives her
1âwphi1

of the freedom to choose her status, which is a privilege that inheres in her as an intangible and inalienable
right.   While a marriage or no-marriage qualification may be justified as a "bona fide occupational qualification,"
53

Brent must prove two factors necessitating its imposition, viz: (1) that the employment qualification is reasonably
related to the essential operation of the job involved; and (2) that there is a factual basis for believing that all or
substantially all persons meeting the qualification would be unable to properly perform the duties of the job.  Brent
54

has not shown the presence of neither of these factors. Perforce, the Court cannot uphold the validity of said
condition.
Labor II – 1
Given the foregoing, Cadiz, therefore, is entitled to reinstatement without loss of seniority rights, and payment of
backwages computed from the time compensation was withheld up to the date of actual reinstatement. Where
reinstatement is no longer viable as an option, separation pay should be awarded as an alternative and as a form of
financial assistance.   In the computation of separation pay, the Court stresses that it should not go beyond the
55

date an employee was deemed to have been actually separated from employment, or beyond the date when
reinstatement was rendered impossible.  In this case, the records do not show whether Cadiz already severed
56

her employment with Brent or whether she is gainfully employed elsewhere; thus, the computation of separation pay
shall be pegged based on the findings that she was employed on August 16, 2002, on her own admission in her
complaint that she was dismissed on November 17, 2006, and that she was earning a salary of P9,108.70 per
month,  which shall then be computed at a rate of one (1) month salary for every year of service,  as follows:
57 58

Monthly salary P9,108.70

multiplied by number of
x
years

in service (Aug 02 to Nov 06) 4

 
P36,434.80

The Court also finds that Cadiz is only entitled to limited backwages. Generally, the computation of backwages is
reckoned from the date of illegal dismissal until actual reinstatement.   In case separation pay is ordered in lieu of
59

reinstatement or reinstatement is waived by the employee, backwages is computed from the time of dismissal until
the finality of the decision ordering separation pay.   Jurisprudence further clarified that the period for computing the
60

backwages during the period of appeal should end on the date that a higher court reversed the labor arbitration
ruling of illegal dismissal.   If applied in Cadiz's case, then the computation of backwages should be from November
61

17, 2006, which was the time of her illegal dismissal, until the date of promulgation of this decision. Nevertheless,
the Court has also recognized that the constitutional policy of providing full protection to labor is not intended to
oppress or destroy management.   The Court notes that at the time of Cadiz's indefinite suspension from
62

employment, Leus was yet to be decided by the Court. Moreover, Brent was acting in good faith and on its honest
belief that Cadiz's pregnancy out of wedlock constituted immorality. Thus, fairness and equity dictate that the award
of backwages shall only be equivalent to one (1) year or P109,304.40, computed as follows:

Monthly salary P9,108.70

multiplied by one
x
year

or 12 months 12

 
P109,304.40

Finally, with regard to Cadiz's prayer for moral and exemplary damages, the Court finds the same without merit. A
finding of illegal dismissal, by itself, does not establish bad faith to entitle an employee to moral damages.   Absent
63

clear and convincing evidence showing that Cadiz's dismissal from Brent's employ had been carried out in an
arbitrary, capricious and malicious manner, moral and exemplary damages cannot be awarded. The Court
nevertheless grants the award of attorney's fees in the amount of ten percent (10%) of the total monetary award,
Cadiz having been forced to litigate in order to seek redress of her grievances. 64

WHEREFORE, the petition is GRANTED. The Resolutions dated July 22, 2008 and February 24, 2009 of the Court
of Appeals in CA-G.R. SP No. 02373-MIN are REVERSED and SET ASIDE, and a NEW ONE ENTERED finding
petitioner Christine Joy Capin-Cadiz to have been dismissed without just cause.

Respondent Brent Hospital and Colleges, Inc. is hereby ORDERED TO PAY petitioner Christine Joy Capin-Cadiz:
Labor II – 1
 (1) One Hundred Nine Thousand Three Hundred Four Pesos and 40/100 (Pl 09,304.40) as backwages;

(2) Thirty-Six Thousand Four Hundred Thirty-Four Pesos and 80/100 (P36,434.80) as separation pay; and

(3) Attorney's fees equivalent to ten percent (10%) of the total award.

The monetary awards granted shall earn legal interest at the rate of six percent (6%) per annum from the date of the
finality of this Decision until fully paid.

Labor II – 1
 21.) G.R. No. 202621, June 22, 2016

ZAIDA R. INOCENTE, Petitioner, v. ST. VINCENT FOUNDATION FOR CHILDREN AND AGING,

INC./VERONICA MENGUITO, Respondents.

DECISION

BRION, J.:

In this petition for review on certiorari,1 we resolve the challenge to the February 27, 2012
decision2 and the July 11, 2012 resolution3 of the Court of Appeals (CA) in CA-G.R. Sp No. 118576.

The CA's February 27, 2012 decision affirmed the October 28, 2010 decision4 of the National Labor
Relations Commission (NLRC) in NLRC LAC Case No. 05-001025-10 (NLRC NCR Case No. 07-10270-
09) as it, in turn, affirmed the November 27, 2009 decision5 of the Labor Arbiter (LA).

The LA's November 27, 2009 decision denied the complaint for illegal dismissal filed by
petitioner  Zaida R. Inocente for lack of merit.

The Factual Antecedents

Respondent St. Vincent Foundation for Children and Aging, Inc. (St. Vincent) is a non-stock, non-
profit foundation engaged in providing assistance to children and aging people and conducting weekly
social and educational activities among them. It is financially supported by the Kansas based Catholic
Foundation for Children and Aging (CFCA), a Catholic foundation dedicated to promoting Christian
values and uplifting the welfare of the children all over the world. Respondent Veronica Menguito is
St. Vincent's President/Directress (collectively, they shall be referred to as respondents).

In 2000, St. Vincent hired Zaida as Program Assistant; it promoted her as Program Officer the
following year. Zaida, then single, was known as Zaida Febrer Ranido. Zaida's duties as program
officer included the following: monitoring and supervising the implementation of the programs of the
foundation, providing training to the staff and sponsored members, formulating and developing
program policies for the foundation, facilitating staff meetings, coordinating and establishing linkages
with other resource agencies and persons, as well as preparing St. Vincent's annual program plan
and budget, and year-end reports.

In 2001, Zaida met Marlon D. Inocente. Marlon was then assigned at St. Vincent's Bataan sub-
project. In 2002, Marlon was transferred to St. Vincent's sub-project in Quezon City. Zaida and
Marlon became close and soon became romantically involved with each other.

In September 2006, St. Vincent adopted the CFCA's Non-Fraternization Policy; it reads in full:
chanRoblesvirtualLawlibrary

CFCA Policy 4.2.2.3. Non-Fraternization Policy

While CFCA does not wish to interfere with the off-duty and personal conduct of its
employees, to prevent unwarranted sexual harassment claims, uncomfortable working relationships,
morale problems among other employees, and even the appearance of impropriety, employees who
direct and coordinate the work of others are strongly discouraged from engaging in consensual
romantic or sexual relationships with any employee or volunteer of CFCA.6 [Emphasis supplied]

Despite St. Vincent's adoption of the Non-Fraternization Policy, Zaida and Marlon discretely continued
their relationship; they kept their relationship private and unknown to St. Vincent even after Marlon
resigned in July 2008.

Labor II – 1
On February 19, 2009, Zaida experienced severe abdominal pain requiring her to go to the hospital.
The doctor later informed her that she had suffered a miscarriage. While confined at the hospital,
Zaida informed St. Vincent of her situation. Menguito verbally allowed Zaida to go on maternity leave
until April 21, 2009. Zaida was released from the hospital two days after her confinement.

On March 31, 2009, Zaida was again confined at the hospital for ectopic pregnancy. Zaida,
thereafter, underwent surgery7 to have one of her fallopian tubes removed. She was discharged from
the hospital on April 4, 2009.

On May 18, 2009, Zaida received from St. Vincent a letter8 dated May 14, 2009 and signed by
Menguito requiring her to explain in writing why no administrative action should be taken against
her. St. Vincent charged her with violation of the CFCA Non-Fraternization Policy and of the St.
Vincent's Code of Conduct provisions prohibiting: (1) acts against agency interest and policy by
indulging in immoral and indecent act; (2) acts against persons by challenging superiors' authority,
threatening and intimidating co-employees, and exerting undue influence on subordinates to gain
personal benefit; and (3) violations within the terms of employment by doing an act offensive to the
moral standard of the Foundation.

In her May 19, 2009 reply-letter, Zaida defended that: (1) her relationship with Marlon started long
before St. Vincent's Non-Fraternization Policy took effect; (2) Marlon was no longer connected with
St. Vincent since 2008; (3) her relationship with Marlon is not immoral as they were both of legal age
and with no impediments to marry; (4) they kept their relationship private and were discreet in their
actions; (5) Marlon stayed at her place only to take care of her while she was sick; and (6) they
already planned to get married as soon as she recovers and their finances improve.

Zaida's explanation failed to convince St. Vincent. In the letter dated May 30, 2009,9 St. Vincent
terminated Zaida's employment for immorality, gross misconduct and violation of St. Vincent's Code
of Conduct.

Zaida and Marlon were subsequently married on June 23, 2009.10 chanrobleslaw

On July 14, 2009, Zaida filed before the LA her complaint for illegal dismissal, with prayer for
reinstatement, backwages, moral and exemplary damages and litigation expenses.

The Labor Tribunal's Rulings

In its decision11 dated November 27, 2009, the labor arbiter (LA) dismissed Zaida's complaint for lack
of basis. The LA found that, despite the implementation of the Non-Fraternization Policy in 2006,
Zaida maintained Eind concealed from St. Vincent her relationship with Marlon. The LA pointed out
that as a program officer, Zaida was under the obligation to observe this Policy and to inform her
employer of her relationship. Her acts, therefore, could be characterized as an act of dishonesty
constituting willful breach of trust and confidence justifying her dismissal.

The LA also found the dismissal compliant with the due process requirements of two notices, each of
which properly apprised Zaida of the specific acts that formed the basis for her dismissal.

In its October 28, 2010 decision,12 the NLRC agreed with the LA's findings. It additionally pointed out
that Zaida's act of continuing her intimate relationship with Marlon despite the implementation of the
Non-Fraternization Policy constituted not only immoral conduct; it also prejudiced the interest of St.
Vincent as it set a bad example not only to her subordinates but also to the children-beneficiaries of
St. Vincent. Her act, therefore, amounted to serious misconduct justifying her dismissal.

The NLRC denied Zaida's motion for reconsideration13 in its January 11, 2011 resolution.14 The denial
prompted Zaida's certiorari petition15 before the CA.
Labor II – 1
 The CA's Ruling

The CA denied Zaida's certiorari petition for lack of merit.16 chanrobleslaw

The CA agreed that Zaida's dismissal was valid, reiterating that Zaida's act of continuing her
relationship with Marlon despite the implementation of the Non-Fraternization Policy, and without the
benefit of marriage, went against the very policy of promoting Christian values that she was charged
to uphold. Her subsequent marriage to Marlon did not help her situation as, under the circumstances,
it appeared more of an afterthought intended to circumvent St. Vincent's rules and code of conduct.

Lastly, the CA declared that her dismissal was not due to her pregnancy and, therefore, did not
violate Article 137(2) of the Labor Code. Rather, her pregnancy was merely the operative act that led
to the discovery of her immoral conduct.

Zaida filed the present petition after the CA denied her motion for reconsideration17 in the CA's July
11, 2012 resolution.18 chanrobleslaw

The Petition

Zaida considers St. Vincent's Non-Fraternization Policy to be an invalid exercise of its management
prerogative. She argues that the Policy is unreasonable; it infringes on the constitutional rights of
persons as it seeks to control even those conduct committed outside of the workplace and beyond
office hours. She contends that her relationship with Marlon, who ceased to be connected with St.
Vincent since 2008 and which relationship they had kept private, clearly goes beyond aspects of the
employment and St. Vincent's legitimate business interests - matters which it could validly regulate
under its management prerogative.

She also argues that the charge of loss of trust and confidence was without clear legal and
factual basis as St. Vincent failed to meet the standards that would justify loss of trust and
confidence. She points out that:

First, as Program Officer, she merely recommends, but does not formulate, program policies; the
chanRoblesvirtualLawlibrary

responsibility to formulate would have made her position as one of trust and confidence. Neither was
she invested with confidence on delicate matters, nor charged with the custody or care of St.
Vincent's assets and properties.

Second, St. Vincent dismissed her for immorality, gross misconduct and violation of the Code of
Conduct. The labor tribunals' finding of willful breach of trust and confidence, therefore, smacks of
bad faith as it deprived her of the opportunity to properly answer the charge.

Third, the acts of fraternization and pregnancy outside of marriage which the respondents used as
grounds for her dismissal are not work related and do not render her unfit to continue working for St.
Vincent.

Fourth, her relationship with Marlon started long before St. Vincent implemented its Non-
Fraternization Policy; it should not retroactively apply to her.

And fifth, at the time of her dismissal, Marlon had long ceased to be St. Vincent's employee such that
the respondents could not validly use their relationship and the Non-Fraternization Policy as grounds
for her dismissal.

Further, Zaida argues that, as worded, St. Vincent's Non-Fraternization Policy does not altogether
prohibit consensual romantic or sexual relationships between employees and/or volunteers of CFCA,
but merely discourages such relationships. The Policy, in fact, does not even require full disclosure
(of such relationships) that could have otherwise justified the respondents in terminating her
Labor II – 1
employment on the ground of dishonesty. Granting arguendo that her relationship with Marlon and
her pregnancy outside of marriage could be considered immoral, the respondents failed to prove that
these acts were prejudicial or detrimental to their interests.

Finally, Zaida argues that her dismissal constitutes discrimination against women. She points out that
at the time the respondents dismissed her, allegedly for immorality, she was still recovering from her
miscarriage. The respondents' act, therefore, clearly violated Article 137(2) of the Labor Code,
Republic Act No. 9710 (the Magna Carta of Women) and the Convention on the Elimination of All
Forms of Discrimination Against Women (CEDAW).

The Case for the Respondents

The respondents counter19 that Zaida's petition should be denied outright because it is procedurally
flawed; it raises: (1) factual issues that are prohibited under Rule 45 of the Rules of Court; and (2)
new issues that cannot be raised only on appeal. Findings of fact of the labor tribunals are conclusive
and should no longer be disturbed, especially when, as in this case, they are affirmed by the CA.

In any case, the respondents submit that the Non-Fraternization Policy was issued in the valid
exercise of management prerogative. It was intended to "prevent unwarranted sexual harassment
claims, uncomfortable working relationships, morale problems among other employees, and even the
appearance of impropriety."

Zaida's employment was terminated not because of her violation of its policy, and certainly
not because of her pregnancy that could otherwise have contravened the laws prohibiting
discrimination against women. Rather, her employment was terminated because of
immorality constituting serious misconduct and willful breach of trust and confidence -
grounds that the Labor Code provides as just causes for dismissal.

The Court's Ruling

We grant the petition.

I.  Procedural issue: jurisdictional limitations of the Court's Rule 45 review of the CA's Rule
65 decision in labor cases

In a Rule 45 review of a CA Labor decision rendered under Rule 65 of the Rules of Court, what
we review are the legal errors that the CA may have committed in arriving at the assailed decision, in
contrast with the review for jurisdictional errors that underlie an original certiorari action.

In determining this legal correctness, we examine the CA decision in the same context that it
determined the presence or the absence of grave abuse of discretion in the NLRC decision that it
reviewed, not on the basis of whether the NLRC decision was correct on the merits. In simple terms,
we test the CA's decision within the same context that the Rule 65 petition was presented before it.

Under this approach, the question that we ask is: Did the CA correctly determine whether the NLRC
committed grave abuse of discretion in ruling on the case? 20chanrobleslaw

We point out as well that underlying this jurisdictional limitation of our Rule 45 review is the legal
reality that in the review of the labor tribunals' rulings, the courts generally accord respect to their
factual findings and the conclusions that they draw from them in view of the tribunals' expertise in
their field. There is also the legal reality that the NLRC decision brought before the CA under the
original certiorari action is already final and executory and can only be reversed on a finding of grave
abuse of discretion.

Labor II – 1
In resolving the present Rule 45 petition, we are therefore, bound by the intrinsic limitations of a
Rule 65 certiorari proceeding: it is an extraordinary remedy aimed solely at correcting errors of
jurisdiction or acts committed without jurisdiction, or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack of jurisdiction. It does not address mere errors of judgement, unless the
error transcends the bounds of the tribunal's jurisdiction.

As defined, "grave abuse of discretion" refers to the arbitrary or despotic exercise of power due to
passion, prejudice or personal hostility; or the whimsical, arbitrary or capricious exercise of power
that amounts to an evasion or refusal to perform a positive duty enjoined by law or to act at all in
contemplation of law.

To be sure, the rule that precludes an inquiry into the correctness of the labor tribunals' appreciation
and assessment of the evidence, and the conclusions drawn from them, is not without exceptions.
The Court, in the past, has recognized that certain exceptional situations require a review of the labor
tribunals' factual findings and the evidence. When there is a showing that the NLRC's factual findings
and conclusions were arrived at arbitrarily, as when its judgement was based on misapprehension or
erroneous apprehension of facts or on the use of wrong or irrelevant considerations21 - situations that
are tainted with grave abuse of discretion -the Court may review these factual findings.

Finally, we should not forget that a Rule 45 review is an appeal from the ruling of the CA on pure
questions of law. We do not admit and review questions of facts unless necessary to
determine whether the CA correctly affirmed the NLRC decision for lack of grave abuse of discretion.

In the present case, the labor tribunals ruled that Zaida's intimate relationship with Marlon out of
wedlock (resulting in her failed pregnancy) and her continuation and concealment of this relationship
despite the implementation of the Non-Fraternization Policy, constituted immorality and dishonesty
that, taken together, justified her dismissal on the ground of serious misconduct and willful breach of
trust and confidence. The CA fully agreed with the labor tribunals' findings and conclusions.

Using the above analysis as guide, we are convinced that the CA grievously erred in upholding the
NLRC's ruling. To our mind, the NLRC gravely abused its discretion when it declared that the acts
imputed against Zaida were sufficient bases for her dismissal.

II. Substantive issue: validity of Zaida's dismissal

A. Burden of proof in dismissal situations

In every dismissal situation, the employer bears the burden of proving the existence of
just or authorized cause for the dismissal and the observance of due process
requirements. This rule implements the security of tenure of the Constitution by imposing the
burden of proof on employers in termination of employment situations.22 The failure on the part of
the employer to discharge this burden renders the dismissal invalid.

Articles 282, 283, and 284 (now Articles 296, 297 and 298)23 of the Labor Code enumerates the
grounds that justifies the dismissal of an employee. These include: serious misconduct or willful
disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, commission of a
crime, and causes analogous to any of these, all under Article 282; closure of establishment and
reduction of personnel, under Article 283; and disease, under Article 284.

Article 277 (now Article 291) of the Labor Code, and Books V and VI of the Omnibus Rules
Implementing the Labor Code, on the other hand, lay down the procedural requirements of a valid
dismissal. These are: (1) written notice specifying the ground or grounds for the dismissal; (2) ample
opportunity for the employee to be heard and defend himself; and (3) written notice of termination
stating that upon due consideration of all the circumstances, grounds have been established to justify
his dismissal.
Labor II – 1
We recognize, in this respect, that of these two requisites for a valid dismissal, the presence or
absence of just or authorized cause is the more crucial. The absence of a valid cause automatically
renders any dismissal action invalid, regardless of the employer's observance of the procedural due
process requirements.

B. Presence or Absence of Valid Cause for the dismissal

Based on the notice to explain and on the termination letter, we find that St. Vincent essentially
dismissed Zaida for: (1) engaging in intimate out-of-wedlock relationship with Marlon which it
considered immoral; (2) her failure to disclose the relationship to the management - an omission
violating its Non-Fraternization Policy which it characterized as gross misconduct; and (3) violating its
Code of Conduct, i.e. committing acts against her superiors' authority and her co-employees,
violating the terms of her employment, and engaging in immoral conduct that goes against its
interest as a Christian institution.

In their respective decisions, the LA, the NLRC, and the CA found the dismissal valid on the ground of
loss of trust and confidence and serious misconduct.

The LA, the NLRC, and the CA considered Zaida's act of maintaining her relationship with Marlon,
despite the implementation of the Non-Fraternization Policy, immoral act that is prejudicial to St.
Vincent's interests and which amounted to serious misconduct. They also considered her failure to
disclose the relationship as an act of dishonesty that willfully breached St. Vincent's trust.

Willful breach of trust (or loss of confidence as interchangeably referred to in jurisprudence) and
serious misconduct are just causes for the dismissal of an employee under Article 282 (a) and (c),
respectively, (now Article 296)24 of the Labor Code. To justify the employee's dismissal on these
grounds, the employer must show that the employee indeed committed act/s constituting breach of
trust or serious misconduct, which acts the courts must gauge within the parameters defined by the
law and jurisprudence.

To place our discussions in proper perspective, the determination of whether Zaida was validly
dismissed on the ground of willful breach of trust and serious misconduct requires the prior
determination of, first, whether Zaida's intimate relationship with Marlon was, under the
circumstances, immoral; and, second, whether such relationship is absolutely prohibited by or is
strictly required to be disclosed to the management under St. Vincent's Non-Fraternization Policy.

We shall separately address these grounds in the discussions below.

On the charge of immorality and

engaging in conduct prejudicial to the
interest of St. Vincent

We find the NLRC's findings of immorality or of committing acts prejudicial to the interest of St.
Vincent to be baseless.

The totality of the attendant circumstances

must be considered in determining whether
an employee's conduct is immoral

Immorality pertains to a course of conduct that offends the morals of the community.25  It connotes
cralawred

conduct or acts that are willful, flagrant or shameless, and that shows indifference to the moral
standards of the upright and respectable members of the community.26 chanrobleslaw

Conducts described as immoral or disgraceful refer to those acts that plainly contradict accepted
Labor II – 1
standards of right and wrong behavior; they are prohibited because they are detrimental to the
conditions on which depend the existence and progress of human society.27 chanrobleslaw

Notwithstanding this characterization, the term "immorality" still often escapes precise definition; the
determination of whether it exists or has taken place depends on the attendant circumstances,
prevailing norms of conduct, and applicable laws.28 chanrobleslaw

In other words, it is the totality of the circumstances surrounding the conduct per se viewed in
relation with the conduct generally accepted by society as respectable or moral, which determines
whether the conduct is disgraceful or immoral.29 The determination of whether a particular conduct is
immoral involves: (1) a consideration of the totality of the circumstances surrounding the conduct;
and (2) an assessment of these circumstances in the light of the prevailing norms of conduct, i.e.,
what the society generally considers moral and respectable,30 and of the applicable laws.

In dismissal situations, the sufficiency

of a conduct claimed to be immoral
must be judged based on secular,
not religious standards.

In general, in determining whether the acts complained of constitute "disgraceful and immoral"
behavior under our laws, the distinction between public and secular morality on the one hand, and
religious morality, on the other hand, should be kept in mind. This distinction as expressed - albeit
not exclusively - in the law, on the one hand, and religious morality, on the other, is important
because the jurisdiction of the Court extends only to public and secular morality.31 chanrobleslaw

In this case, we note that both Zaida and Marlon at all times had no impediments to marry each
other. They were adults who met at work, dated, fell in love and became sweethearts. The intimate
sexual relations between them were consensual, borne by their love for one another and which they
engaged in discreetly and in strict privacy. They continued their relationship even after Marlon left St.
Vincent in 2008. They took their marriage vows soon after Zaida recovered from her miscarriage,
thus validating their union in the eyes of both men and God.

All these circumstances show the sincerity and honesty of the relationship between Zaida and Marlon.
They also show their genuine regard and love for one another - a natural human emotion that is
neither shameless, callous, nor offensive to the opinion of the upright and respectable members of
the secular community. While their actions might not have strictly conformed with the beliefs, ways,
and mores of St. Vincent - which is governed largely by religious morality - or with the personal
views of its officials, these actions are not prohibited under any law nor are they contrary to conduct
generally accepted by society as respectable or moral.

Significantly, even the timeline of the events in this case supports our observation that their intimate
relations was founded on love, viz: Zaida and Marlon met in 2002 and soon become sweethearts; St.
Vincent adopted the Non-Fraternization policy in September 2006; Marlon resigned from St. Vincent
in July 2008; in February 2009, Zaida had the miscarriage that disclosed to St. Vincent Zaida's
relationship with Marlon; and St. Vincent terminated Zaida's employment in May 2009.

Clearly from this timeline, Zaida and Marlon have long been in their relationship (for about four
years) by the time St. Vincent adopted the Policy; their relationship, by that time and given the turn
out of the events, would have already been very serious. To be sure, no reasonable person could
have expected them to sever the relationship simply because St. Vincent chose to adopt the Non-
Fraternization Policy in 2006. As Zaida aptly argued, love is not a mechanical emotion that can easily
be turned on and off. This is the lesson Shakespeare impressed on us in Romeo and Juliet - a play
whose setting antedated those of Marlon and Zaida by about 405 hundred years.32 chanrobleslaw

We thus reiterate that mere private sexual relations between two unmarried and consenting adults,
Labor II – 1
even if the relations result in pregnancy or miscarriage out of wedlock and without more, are not
enough to warrant liability for illicit behavior. The voluntary intimacy between two unmarried adults,
where both are not under any impediment to marry, where no deceit exists, and which was done in
complete privacy, is neither criminal nor so unprincipled as to warrant disciplinary action.33
chanrobleslaw

To use an example more recent than Shakespeare's, if the Court did not consider the complained
acts in Escritor immoral, more so should the Court in this case not consider Zaida's consensual
intimate relationship with Marlon immoral.

Zaida's relationship with Marlon was not

an act per se prejudicial to the interest
of St. Vincent.

Since Zaida and Marlon's relationship was not per se immoral based on secular morality standards,
St. Vincent carries the burden of showing that they were engaged in an act prejudicial to its interest
and one that it has the right to protect against. We reiterate, in this respect, that Zaida and Marlon
were very discrete in their relationship and kept this relationship strictly private. They did not flaunt
their affections for each other at the workplace. No evidence to the contrary was ever presented.
Zaida and Marlon's relationship, in short, was almost completely unknown to everyone in St. Vincent;
the respondents in fact even admitted that they discovered the relationship only in 2009.

Significantly, St. Vincent has fully failed to expound on the interest that is within its own right to
protect and uphold. The respondents did not specify in what manner and to what extent Zaida and
Marlon's relationship prejudiced or would have prejudiced St. Vincent's interest. To be sure, the other
employees and volunteers of St. Vincent know, by now, what had happened to Zaida and the
circumstances surrounding her dismissal. But, the attention which the relationship had drawn could
hardly be imputed to her; if at all, it was the respondents' actions and reactions which should be
blamed for the undesired publicity.

Moreover, aside from the relationship that St. Vincent considered to be immoral, it did not specify,
nor prove any other act or acts that Zaida might have committed to the prejudice of St. Vincent's
interest. A mere allegation that Zaida committed act or acts prejudicial to St. Vincent's interest,
without more, does not constitute sufficient basis for her dismissal.

On the charge of violation of the Non-

Fraternization Policy

Neither can we agree with the NLRC's findings that Zaida's relationship with Marlon violated St.
Vincent's Non-Fraternization Policy.

For reference, we reiterate below the Policy's provisions:

chanRoblesvirtualLawlibrary

CFCA Policy 4.2.2.3. Non-Fraternization Policy

While CFCA does not wish to interfere with the off-duty and personal conduct of its
employees, to prevent unwarranted sexual harassment claims, uncomfortable working relationships,
morale problems among other employees, and even the appearance of impropriety, employees who
direct and coordinate the work of others are strongly discouraged from engaging in
consensual romantic or sexual relationships with any employee or volunteer of
CFCA.34 [Emphasis supplied]

A reading of the Policy's provisions shows that they profess to touch only on on-duty conduct of its
employees. Contrary to the respondents' arguments, too, the CFCA employees who direct or
coordinate the work of others are only "strongly discouraged  from engaging in consensual
romantic or sexual relationships with any employee or volunteer of CFCA. " It does not prohibit them,
Labor II – 1
(either absolutely or with qualifications) from engaging in consensual romantic or sexual
relationships.

To discourage means "to deprive of courage or confidence: dishearten, deject; to attempt to

dissuade from action: dampen or lessen the boldness or zeal of for some action."35 chanrobleslaw

To prohibit, on the other hand, means "to forbid by authority or command: enjoin, interdict; to
prevent from doing or accomplishing something: effectively stop; to make impossible: disbar, hinder,
preclude."36 chanrobleslaw

While "to discourage" and "to prohibit" are essentially similar in that both seek to achieve similar
ends, i.e., the non-happening or non-accomplishment of an event or act, they are still significantly
different in degree and in terms of their effect and impact in the realm of labor relations laws.

The former - "to discourage" - may lead the actor i.e., the employee, to disfavor, disapprobation, or
some other unpleasant consequences, but the actor/employee may still nonetheless do or perform
the "discouraged" act.  If the actor/employee does or performs the "discouraged" act, the employee
may not be subjected to any punishment or disciplinary action as he or she does not violate any rule,
policy, or law.

In contrast, "to prohibit" will certainly subject the actor/employee to punishment or disciplinary
action if the actor/employee does or performs the prohibited act as he or she violates a rule, policy or
law.

From this perspective, a St. Vincent employee who directs or coordinates the work of other St.
Vincent employee or volunteer, and who engages in a consensual romantic or sexual relationship
with a St. Vincent employee or volunteer will not violate the Non-Fraternization Policy unless
circumstances are shown that the act goes beyond the usual norms of morality. For example, the
employees' ascendancy or supervising authority, over another employee with whom he or she had a
relationship, and the undue advantage taken because of this ascendancy or authority, if shown,
would lead to a different conclusion. At most, the employee may be considered to have committed an
act that is frowned upon; but certainly, the employee does not commit an act that would warrant his
or her dismissal.

In addition, an examination of the Policy's provisions shows that it does not require St. Vincent's
employees to disclose any such consensual romantic or sexual relationships to the management. In
fact, nowhere in the records does it show that St. Vincent employees are under any obligation to
make the disclosure, whose violation would subject the employee to disciplinary action.

Accordingly, the failure of a St. Vincent employee to disclose to the management his or her
consensual romantic or sexual relationship with another employee or volunteer does not constitute a
violation of the Non-Fraternization Policy.

Based on these considerations, we find that Zaida clearly did not violate the Non-Fraternization Policy
when she continued her relationship with Marlon despite the Policy's adoption in 2006. As explicitly
worded, the Policy "does not wish to interfere with the off-duty and personal conduct of its
employees," and only strongly discourages (thus still technically allows) consensual romantic or
sexual relationships; it does not prohibit such relationships. No evidence furthermore has been
shown indicating Zaida's abuse of her supervisory position, before or after the Policy was put in
place. Her failure, therefore, to observe the Policy or to otherwise disclose the relationship, which
continued even after the adoption of the Policy, did not constitute a violation of company policy to
justify her dismissal.

On the charge of violation of the Code of Conduct

provisions prohibiting acts against agency
Labor II – 1
interest, acts against persons, and violations
of the terms of employment
We also do not find sufficient basis for Zaida's dismissal for violation of the Code of Conduct
provisions prohibiting: acts against agency interest by indulging in immoral and indecent act; acts
against persons by challenging superiors' authority, threatening and intimidating co-employees and
exerting undue influence on subordinates to gain personal benefit; and violations of the terms of
employment by doing an act offensive to the moral standards of the foundation.

We point out in this respect that the charges of violating the Code of Conduct provisions prohibiting
acts against agency interest and violations of the terms of employment are both premised on the
alleged immoral and indecent acts committed by Zaida in engaging in consensual romantic or sexual
relationship with Marlon. Since Zaida did not violate the Non-Fraternization Policy, these other
charges were clearly unwarranted and baseless.

In the same vein, we likewise find no sufficient basis for Zaida's dismissal for allegedly violating the
Code of Conduct provisions prohibiting acts against persons. While St. Vincent claimed, in the May
28, 2009 Notice of Termination, that Zaida "exerted undue influence on [her co-workers and
subordinates] to favor [herself] and/or Mr. Inocente", it did not specify in what manner and to what
extent she unduly influenced her co-workers and subordinates for hers and Marlon's benefit.

To justify a dismissal based on the act of "exert[ing] undue influence," the charge must be supported
by a narration of the specific act/s she allegedly committed by which she unduly influenced her co-
worker and subordinates, of the dates when these act/s were committed, and of the names of the co-
workers and/or subordinates affected by her alleged actions. The respondents, however, miserably
failed to establish these relevant facts. In other words, the charge of exerting undue influence is a
conclusion that was not supported by any factual or evidentiary basis.

Dismissal on the ground of serious misconduct

and willful breach of trust and confidence

Based on the above considerations, we find Zaida's dismissal illegal for lack of valid cause. St.
Vincent failed to sufficiently prove its charges against Zaida to justify her dismissal for serious
misconduct and loss of trust and confidence.

a. Serious misconduct

Misconduct has been defined as improper or wrong conduct. It is the transgression of some
established or definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error of judgment. To be serious, the misconduct must be of
such grave or aggravated character and not merely trivial and unimportant; it must be connected
with the employee's work to constitute just cause for separation.37 chanrobleslaw

Thus, for an employee to be validly dismissed on the ground of serious misconduct, the employee
must first, have committed misconduct or an improper or wrong conduct. And second, the
misconduct or improper behavior is: (1) serious; (2) relate to the performance of the
employee's duties; and (3) show that the employee has become unfit to continue working
for the employer.38 chanrobleslaw

As we explained above, Zaida's relationship with Marlon is neither illegal nor immoral; it also did not
violate the Non-Fraternization Policy. In other words, Zaida did not commit any misconduct, serious
or otherwise, that would justify her dismissal based on serious misconduct.

Moreover, St. Vincent failed to show how Zaida's relationship with Marlon affected her performance
of her duties as a Program Officer and that she has become unfit to continue working for it, whether
for the same position or otherwise. Her dismissal based on this ground, therefore, is without any
Labor II – 1
factual or legal basis.

b. Willful breach of trust and confidence

Willful breach of trust, as just cause for the termination of employment, is founded on the fact that
the employee concerned: (1) holds a position of trust and confidence, i.e., managerial personnel or
those vested with powers and prerogatives to lay down management policies and/or to hire, transfer,
suspend, lay-off, recall, discharge, assign or discipline employees; or (2) is routinely charged with
the care and custody of the employer's money or property, i.e., cashiers, auditors, property
custodians, or those who, in normal and routine exercise of their functions, regularly handle
significant amounts of money or property.39 In any of these situations, it is the employee's breach of
the trust that his or her position holds which results in the employer's loss of confidence.

Significantly, loss of confidence is, by its nature, subjective and prone to abuse by the employer.
Thus, the law requires that the breach of trust -which results in the loss of confidence - must be
willful. The 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.40 chanrobleslaw

We clarify, however, that it is the breach of the employer's trust, not the specific employee act/s
which the employer claims caused the breach, which the law requires to be willful, knowingly and
purposefully done by the employee to justify the dismissal on the ground of loss of trust and
confidence.

In Vitarich Corp. v. NLRC,41 we laid out the guidelines for the application of the doctrine of loss of
confidence, namely: (1) the loss of confidence should not be simulated; (2) it should not be
used as a subterfuge for causes which are improper, illegal or unjustified; (3) it should not
be arbitrarily asserted in the face of overwhelming evidence to the contrary; and (4) it
must be genuine, not a mere afterthought to justify earlier action taken in bad faith.42 In
short, there must be an actual breach of duty which must be established by substantial evidence.43 chanrobleslaw

We reiterated these guidelines in Nokom v. National Labor Relations Commission,44  Fujitsu Computer
Products Corp. of the Phils, v. Court of Appeals,45Lopez v. Keppel Bank Philippines, Inc,46  citing
Nokom, and Lima Land, Inc., et al. v. Cuevas.47 chanrobleslaw

In the present case, we agree that Zaida indeed held a position of trust and confidence. Nonetheless,
we cannot support the NLRC's findings that she committed act/s that breached St. Vincent's trust.
Zaida's relationship with Marlon, to reiterate, was not wrong, illegal, or immoral from the perspective
of secular morality; it is also not prohibited by the Non-Fraterni2^ation Policy nor is it required, by
the Policy, to be disclosed to St. Vincent's management or officials. In short, Zaida did not commit
any act or misconduct that willfully, intentionally, or purposely breached St. Vincent's trust.

Notably, St. Vincent did not charge Zaida with, nor terminate her employment for, willful breach of
trust. Rather, it charged her with violation of the Non-Fraternization Policy and of the Code of
Conduct, and dismissed her for immorality, gross misconduct, and violation of the Code of Conduct -
none of which implied or suggested willful breach of trust.

In this regard, we reiterate, with approval, Zaida's observations on this point: the labor tribunals'
findings of willful breach of trust and confidence shows clear bad faith as it effectively deprived her of
an opportunity to rebut any charge of willful breach of trust.

C. Compliance with the Procedural Due Process Requirements

All three tribunals agreed, in this case, that the due process requirements, as laid out under Article
277 of the Labor Code and its IRR, were sufficiently observed by St. Vincent in its dismissal action.

Labor II – 1
We disagree with the three tribunals.

As pointed out above, St. Vincent did not specify in what manner and to what extent Zaida unduly
influenced her co-workers and subordinates for hers and Marlon's benefit with regard to the charge of
committing acts against persons. For the charge of "exert[ing] undue influence" to have validly
supported Zaida's dismissal, it should have been supported by a narration of the specific act/s she
allegedly committed by which she unduly influenced her co-worker and subordinates, of the dates
when these act/s were committed, and of the names of the co-workers and/or subordinates affected
by her alleged actions.

The specification of these facts and matters is necessary in order to fully apprise her of all of the
charges against her and enable her to present evidence in her defense. St. Vincent's failure to make
this crucial specification in the notice to explain and in the termination letter clearly deprived Zaida of
due process.

In light of these findings, we find the NLRC in grave abuse of its discretion in affirming the LA's ruling
as it declared that St. Vincent complied with the due process requirements.

Specifically, the NLRC capriciously and whimsically exercised its judgment by using the wrong
considerations and by failing to consider all relevant facts and evidence presented by the parties, as
well as the totality of the surrounding circumstances, as it upheld Zaida's dismissal. Consequently,
we find the CA in grave error as it affirmed the NLRC's ruling; the CA reversibly erred in failing to
recognize the grave abuse of discretion which the NLRC committed in concluding that Zaida's
dismissal was valid.

WHEREFORE, in light of these considerations, we hereby GRANT the petition.

We REVERSE and SET ASIDE the decision dated February 27, 2012 and the resolution dated July
11, 2012 of the Court of Appeals in CA-G.R. SP No. 118576. We declare petitioner Zaida R. Inocente
as illegally dismissed.

Labor II – 1
 22.) G.R. No. 198587, January 14, 2015

SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J. BETIA, Petitioners, v. MA. JOPETTE M.

REBESENCIO, MONTASSAH B. SACAR-ADIONG, ROUEN RUTH A. CRISTOBAL AND LORAINE
S. SCHNEIDER-CRUZ, Respondents.

DECISION

LEONEN, J.:

All Filipinos are entitled to the protection of the rights guaranteed in the Constitution.

This is a Petition for Review on Certiorari with application for the issuance of a temporary restraining
order and/or writ of preliminary injunction under Rule 45 of the 1997 Rules of Civil Procedure praying
that judgment be rendered reversing and setting aside the June 16, 2011 Decision1 and September
13, 2011 Resolution2 of the Court of Appeals in CA-G.R. SP. No. 113006.

Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established and existing under the
laws of Jeddah, Kingdom of Saudi Arabia. It has a Philippine office located at 4/F, Metro House
Building, Sen. Gil J. Puyat Avenue, Makati City.3 In its Petition filed with this court, Saudia identified
itself as follows:
chanroblesvirtuallawlibrary

1. Petitioner SAUDIA is a foreign corporation established and existing under the Royal Decree No.
M/24 of 18.07.1385H (10.02.1962G) in Jeddah, Kingdom of Saudi Arabia ("KSA"). Its Philippine
Office is located at 4/F Metro House Building, Sen, Gil J. Puyat Avenue, Makati City (Philippine
Office). It may be served with orders of this Honorable Court through undersigned counsel at 4th and
6th Floors, Citibank Center Bldg., 8741 Paseo de Roxas, Makati City.4 (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited and hired by Saudia as
Temporary Flight Attendants with the accreditation and approval of the Philippine Overseas
Employment Administration.5 After undergoing seminars required by the Philippine Overseas
Employment Administration for deployment overseas, as well as training modules offered by Saudia
(e.g., initial flight attendant/training course and transition training), and after working as Temporary
Flight Attendants, respondents became Permanent Flight Attendants. They then entered into Cabin
Attendant contracts with Saudia: Ma. Jopette M. Rebesencio (Ma. Jopette) on May 16,
1990;6 Montassah B. Sacar-Adiong (Montassah) and Rouen Ruth A. Cristobal (Rouen Ruth) on May
22, 1993;7 and Loraine Schneider-Cruz (Loraine) on August 27, 1995.8

Respondents continued their employment with Saudia until they were separated from service on
various dates in 2006.9

Respondents contended that the termination of their employment was illegal. They alleged that the
termination was made solely because they were pregnant.10

As respondents alleged, they had informed Saudia of their respective pregnancies and had gone
through the necessary procedures to process their maternity leaves. Initially, Saudia had given its
approval but later on informed respondents that its management in Jeddah, Saudi Arabia had
disapproved their maternity leaves. In addition, it required respondents to file their resignation
letters.11

Respondents were told that if they did not resign, Saudia would terminate them all the same. The
threat of termination entailed the loss of benefits, such as separation pay and ticket discount
entitlements.12

Labor II – 1
Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's Base Manager, Abdulmalik
Saddik (Abdulmalik).13 Montassah was informed personally by Abdulmalik and a certain Faisal
Hussein on October 20, 2006 after being required to report to the office one (1) month into her
maternity leave.14 Rouen Ruth was also personally informed by Abdulmalik on October 17, 2006 after
being required to report to the office by her Group Supervisor.15 Loraine received a call on October
12, 2006 from her Group Supervisor, Dakila Salvador.16

Saudia anchored its disapproval of respondents' maternity leaves and demand for their resignation
on its "Unified Employment Contract for Female Cabin Attendants" (Unified Contract).17 Under the
Unified Contract, the employment of a Flight Attendant who becomes pregnant is rendered void. It
provides: chanroblesvirtuallawlibrary

(H) Due to the essential nature of the Air Hostess functions to be physically fit on board to provide
various services required in normal or emergency cases on both domestic/international flights beside
her role in maintaining continuous safety and security of passengers, and since she will not be able
to maintain the required medical fitness while at work in case of pregnancy, accordingly,  if the Air
Hostess becomes pregnant at any time during the term of this contract, this shall render
her employment contract as void and she will be terminated due to lack of medical
fitness.18 (Emphasis supplied)

In their Comment on the present Petition,19 respondents emphasized that the Unified Contract took
effect on September 23, 2006 (the first day of Ramadan),20 well after they had filed and had their
maternity leaves approved. Ma. Jopette filed her maternity leave application on September 5,
2006.21 Montassah filed her maternity leave application on August 29, 2006, and its approval was
already indicated in Saudia's computer system by August 30, 2006.22 Rouen Ruth filed her maternity
leave application on September 13, 2006,23 and Loraine filed her maternity leave application on
August 22, 2006.24

Rather than comply and tender resignation letters, respondents filed separate appeal letters that
were all rejected.25

Despite these initial rejections, respondents each received calls on the morning of November 6, 2006
from Saudia's office secretary informing them that their maternity leaves had been approved.
Saudia, however, was quick to renege on its approval. On the evening of November 6, 2006,
respondents again received calls informing them that it had received notification from Jeddah, Saudi
Arabia that their maternity leaves had been disapproved.26

Faced with the dilemma of resigning or totally losing their benefits, respondents executed
handwritten resignation letters. In Montassah's and Rouen Ruth's cases, their resignations were
executed on Saudia's blank letterheads that Saudia had provided. These letterheads already had the
word "RESIGNATION" typed on the subject portions of their headings when these were handed to
respondents.27

On November 8, 2007, respondents filed a Complaint against Saudia and its officers for illegal
dismissal and for underpayment of salary, overtime pay, premium pay for holiday, rest day,
premium, service incentive leave pay, 13th month pay, separation pay, night shift differentials,
medical expense reimbursements, retirement benefits, illegal deduction, lay-over expense and
allowances, moral and exemplary damages, and attorney's fees.28 The case was initially assigned to
Labor Arbiter Hermino V. Suelo and docketed as NLRC NCR Case No. 00-11-12342-07.

Saudia assailed the jurisdiction of the Labor Arbiter.29 It claimed that all the determining points of
contact referred to foreign law and insisted that the Complaint ought to be dismissed on the ground
of forum non conveniens.30 It added that respondents had no cause of action as they resigned
voluntarily.31

Labor II – 1
On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco rendered the
Decision32 dismissing respondents' Complaint. The dispositive portion of this Decision reads: chanroblesvirtuallawlibrary

WHEREFORE, premises' considered, judgment is hereby rendered DISMISSING the instant

complaint for lack of jurisdiction/merit.33
lawlawlibrary
cra

On respondents' appeal, the National Labor Relations Commission's Sixth Division reversed the ruling
of Executive Labor Arbiter Jambaro-Franco. It explained that "[considering that complainants-
appellants are OFWs, the Labor Arbiters and the NLRC has [sic] jurisdiction to hear and decide their
complaint for illegal termination."34 On the matter of forum non conveniens, it noted that there were
no special circumstances that warranted its abstention from exercising jurisdiction.35 On the issue of
whether respondents were validly dismissed, it held that there was nothing on record to support
Saudia's claim that respondents resigned voluntarily.

The dispositive portion of the November 19, 2009 National Labor Relations Commission
Decision36 reads:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, judgment is hereby rendered finding the appeal impressed with
merit. The respondents-appellees are hereby directed to pay complainants-appellants the aggregate
amount of SR614,001.24 corresponding to their backwages and separation pay plus ten (10%)
percent thereof as attorney's fees. The decision of the Labor Arbiter dated December 12, 2008 is
hereby VACATED and SET ASIDE. Attached is the computation prepared by this Commission and
made an integral part of this Decision.37 cralawlawlibrary

In the Resolution dated February 11, 2010,38 the National Labor Relations Commission denied
petitioners' Motion for Reconsideration.

In the June 16, 2011 Decision,39 the Court of Appeals denied petitioners' Rule 65 Petition and
modified the Decision of the National Labor Relations Commission with respect to the award of
separation pay and backwages.

The dispositive portion of the Court of Appeals Decision reads: chanroblesvirtuallawlibrary

WHEREFORE, the instant petition is hereby DENIED. The Decision dated November 19, 2009 issued
by public respondent, Sixth Division of the National Labor Relations Commission - National Capital
Region is MODIFIED only insofar as the computation of the award of separation pay and backwages.
For greater clarity, petitioners are ordered to pay private respondents separation pay which shall be
computed from private respondents' first day of employment up to the finality of this decision, at the
rate of one month per year of service and backwages which shall be computed from the date the
private respondents were illegally terminated until finality of this decision. Consequently, the ten
percent (10%) attorney's fees shall be based on the total amount of the award. The assailed Decision
is affirmed in all other respects.

The labor arbiter is hereby DIRECTED to make a recomputation based on the foregoing.40 cralawlawlibrary

In the Resolution dated September 13, 2011,41 the Court of Appeals denied petitioners' Motion for
Reconsideration.

Hence, this Appeal was filed.

The issues for resolution are the following:

First, whether the Labor Arbiter and the National Labor Relations Commission may exercise
jurisdiction over Saudi Arabian Airlines and apply Philippine law in adjudicating the present dispute;

Second, whether respondents' voluntarily resigned or were illegally terminated; and

Lastly, whether Brenda J. Betia may be held personally liable along with Saudi Arabian Airlines. chanRoblesvirtualLawlibrary

Labor II – 1
Summons were validly served on Saudia and jurisdiction over it validly acquired.

There is no doubt that the pleadings and summons were served on Saudia through its
counsel.42 Saudia, however, claims that the Labor Arbiter and the National Labor Relations
Commission had no jurisdiction over it because summons were never served on it but on "Saudia
Manila."43 Referring to itself as "Saudia Jeddah," it claims that "Saudia Jeddah" and not "Saudia
Manila" was the employer of respondents because:

First, "Saudia Manila" was never a party to the Cabin Attendant contracts entered into by
respondents;

Second, it was "Saudia Jeddah" that provided the funds to pay for respondents' salaries and benefits;
and

Lastly, it was with "Saudia Jeddah" that respondents filed their resignations.44

Saudia posits that respondents' Complaint was brought against the wrong party because "Saudia
Manila," upon which summons was served, was never the employer of respondents.45

Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other than its bare allegation,
there is no basis for concluding that "Saudia Jeddah" is distinct from "Saudia Manila."

What is clear is Saudia's statement in its own Petition that what it has is a "Philippine Office . . .
located at 4/F Metro House Building, Sen. Gil J. Puyat Avenue, Makati City."46 Even in the position
paper that Saudia submitted to the Labor Arbiter,47 what Saudia now refers to as "Saudia Jeddah"
was then only referred to as "Saudia Head Office at Jeddah, KSA,"48 while what Saudia now refers to
as "Saudia Manila" was then only referred to as "Saudia's office in Manila."49

By its own admission, Saudia, while a foreign corporation, has a Philippine office.

Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign Investments Act of 1991,
provides the following: chanroblesvirtuallawlibrary

The phrase "doing business" shall include . . . opening offices, whether called "liaison"
offices or branches; . . . and any other act or acts that imply a continuity of commercial dealings or
arrangements and contemplate to that extent the performance of acts or works, or the exercise of
some of the functions normally incident to, and in progressive prosecution of commercial gain or of
the purpose and object of the business organization. (Emphasis supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads to no other conclusion than
that Saudia is a foreign corporation doing business in the Philippines. As such, Saudia may be sued in
the Philippines and is subject to the jurisdiction of Philippine tribunals.

Moreover, since there is no real distinction between "Saudia Jeddah" and "Saudia Manila" — the
latter being nothing more than Saudia's local office — service of summons to Saudia's office in Manila
sufficed to vest jurisdiction over Saudia's person in Philippine tribunals. chanRoblesvirtualLawlibrary

II

Saudia asserts that Philippine courts and/or tribunals are not in a position to make an intelligent
decision as to the law and the facts. This is because respondents' Cabin Attendant contracts require
the application of the laws of Saudi Arabia, rather than those of the Philippines.50 It claims that the
difficulty of ascertaining foreign law calls into operation the principle of forum non conveniens,
thereby rendering improper the exercise of jurisdiction by Philippine tribunals.51

A choice of law governing the validity of contracts or the interpretation of its provisions dees not
Labor II – 1
necessarily imply forum non conveniens. Choice of law and forum non conveniens are entirely
different matters.

Choice of law provisions are an offshoot of the fundamental principle of autonomy of contracts.
Article 1306 of the Civil Code firmly ensconces this: chanroblesvirtuallawlibrary

Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy.

In contrast, forum non conveniens is a device akin to the rule against forum shopping. It is designed
to frustrate illicit means for securing advantages and vexing litigants that would otherwise be
possible if the venue of litigation (or dispute resolution) were left entirely to the whim of either party.

Contractual choice of law provisions factor into transnational litigation and dispute resolution in one
of or in a combination of four ways: (1) procedures for settling disputes, e.g., arbitration; (2) forum,
i.e., venue; (3) governing law; and (4) basis for interpretation. Forum non conveniens relates to, but
is not subsumed by, the second of these.

Likewise, contractual choice of law is not determinative of jurisdiction. Stipulating on the laws of a
given jurisdiction as the governing law of a contract does not preclude the exercise of jurisdiction by
tribunals elsewhere. The reverse is equally true: The assumption of jurisdiction by tribunals does
not ipso facto mean that it cannot apply and rule on the basis of the parties' stipulation. In Hasegawa
v. Kitamura:52 ChanRoblesVirtualawlibrary

Analytically, jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it
is fair to cause a defendant to travel to this state; choice of law asks the further question whether
the application of a substantive law V'hich will determine the merits of the case is fair to both parties.
The power to exercise jurisdiction does not automatically give a state constitutional authority to apply
forum law. While jurisdiction and the choice of the lex fori will often, coincide, the "minimum
contacts" for one do not always provide the necessary "significant contacts" for the other. The
question of whether the law of a state can be applied to a transaction is different from the question
of whether the courts of that state have jurisdiction to enter a judgment.53 cralawlawlibrary

As various dealings, commercial or otherwise, are facilitated by the progressive ease of

communication and travel, persons from various jurisdictions find themselves transacting with each
other. Contracts involving foreign elements are, however, nothing new. Conflict of laws situations
precipitated by disputes and litigation anchored on these contracts are not totally novel.

Transnational transactions entail differing laws on the requirements Q for the validity of the
formalities and substantive provisions of contracts and their interpretation. These transactions
inevitably lend themselves to the possibility of various fora for litigation and dispute resolution. As
observed by an eminent expert on transnational law: chanroblesvirtuallawlibrary

The more jurisdictions having an interest in, or merely even a point of contact with, a transaction or
relationship, the greater the number of potential fora for the resolution of disputes arising out of or
related to that transaction or relationship. In a world of increased mobility, where business and
personal transactions transcend national boundaries, the jurisdiction of a number of different fora
may easily be invoked in a single or a set of related disputes.54 cralawlawlibrary

Philippine law is definite as to what governs the formal or extrinsic validity of contracts. The first
paragraph of Article 17 of the Civil Code provides that "[t]he forms and solemnities of contracts . . .
shall be governed by the laws of the country in which they are executed"55 (i.e., lex loci
celebrationis).

In contrast, there is no statutorily established mode of settling conflict of laws situations on matters
pertaining to substantive content of contracts. It has been noted that three (3) modes have
emerged: (1) lex loci contractus or the law of the place of the making; (2) lex loci solutionis or the
law of the place of performance; and (3) lex loci intentionis or the law intended by the parties.56

Labor II – 1
Given Saudia's assertions, of particular relevance to resolving the present dispute is lex loci
intentionis.

An author observed that Spanish jurists and commentators "favor lex loci intentionis."57 These jurists
and commentators proceed from the Civil Code of Spain, which, like our Civil Code, is silent on what
governs the intrinsic validity of contracts, and the same civil law traditions from which we draw ours.

In this jurisdiction, this court, in Philippine Export and Foreign Loan Guarantee v. V.P. Eusebio
Construction, Inc.,58 manifested preference for allowing the parties to select the law applicable to
their contract":chanroblesvirtuallawlibrary

No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule
followed by most legal systems, however, is that the intrinsic validity of a contract must be governed
by the lex contractus or "proper law of the contract." This is the law voluntarily agreed upon by the
parties (the lex loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as substantial connection with the
transaction, or the nationality or domicile of the parties. Philippine courts would do well to adopt the
first and most basic rule in most legal systems, namely, to allow the parties to select the law
applicable to their contract, subject to the limitation that it is not against the law, morals, or public
policy of the forum and that the chosen law must bear a substantive relationship to the
transaction.59 (Emphasis in the original)
Saudia asserts that stipulations set in the Cabin Attendant contracts require the application of the
laws of Saudi Arabia. It insists that the need to comply with these stipulations calls into operation the
doctrine of forum non conveniens and, in turn, makes it necessary for Philippine tribunals to refrain
from exercising jurisdiction.

As mentioned, contractual choice of laws factors into transnational litigation in any or a combination
of four (4) ways. Moreover, forum non conveniens relates to one of these: choosing between multiple
possible fora.

Nevertheless, the possibility of parallel litigation in multiple fora — along with the host of difficulties it
poses — is not unique to transnational litigation. It is a difficulty that similarly arises in disputes well
within the bounds of a singe jurisdiction.

When parallel litigation arises strictly within the context of a single jurisdiction, such rules as those
on forum shopping, litis pendentia, and res judicata come into operation. Thus, in the Philippines, the
1997 Rules on Civil Procedure provide for willful and deliberate forum shopping as a ground not only
for summary dismissal with prejudice but also for citing parties and counsels in direct contempt, as
well as for the imposition of administrative sanctions.60 Likewise, the same rules expressly provide
that a party may seek the dismissal of a Complaint or another pleading asserting a claim on the
ground "[t]hat there is another action pending between the same parties for the same cause,"
i.e., litis pendentia, or "[t]hat the cause of action is barred by a prior judgment,"61 i.e., res judicata.

Forum non conveniens, like the rules of forum shopping, litis pendentia, and res judicata, is a means
of addressing the problem of parallel litigation. While the rules of forum shopping, litis pendentia,
and res judicata are designed to address the problem of parallel litigation within a single
jurisdiction, forum non conveniens is a means devised to address parallel litigation arising in multiple
jurisdictions.

Forum non conveniens literally translates to "the forum is inconvenient."62 It is a concept in private

international law and was devised to combat the "less than honorable" reasons and excuses that
litigants use to secure procedural advantages, annoy and harass defendants, avoid overcrowded
dockets, and select a "friendlier" venue.63 Thus, the doctrine of forum non conveniens addresses the
same rationale that the rule against forum shopping does, albeit on a multijurisdictional scale.

Forum non conveniens, like res judicata,64 is a concept originating in common law.65 However, unlike
Labor II – 1
the rule on res judicata, as well as those on litis pendentia and forum shopping, forum non
conveniens finds no textual anchor, whether in statute or in procedural rules, in our civil law system.
Nevertheless, jurisprudence has applied forum non conveniens as basis for a court to decline its
exercise of jurisdiction.66

Forum non conveniens is soundly applied not only to address parallel litigation and undermine a
litigant's capacity to vex and secure undue advantages by engaging in forum shopping on an
international scale. It is also grounded on principles of comity and judicial efficiency.

Consistent with the principle of comity, a tribunal's desistance in exercising jurisdiction on account
of forum non conveniens is a deferential gesture to the tribunals of another sovereign. It is a
measure that prevents the former's having to interfere in affairs which are better and more
competently addressed by the latter. Further, forum non conveniens entails a recognition not only
that tribunals elsewhere are better suited to rule on and resolve a controversy, but also, that these
tribunals are better positioned to enforce judgments and, ultimately, to dispense justice. Forum non
conveniens prevents the embarrassment of an awkward situation where a tribunal is rendered
incompetent in the face of the greater capability — both analytical and practical — of a tribunal in
another jurisdiction.

The wisdom of avoiding conflicting and unenforceable judgments is as much a matter of efficiency
and economy as it is a matter of international courtesy. A court would effectively be neutering itself if
it insists on adjudicating a controversy when it knows full well that it is in no position to enforce its
judgment. Doing so is not only an exercise in futility; it is an act of frivolity. It clogs the dockets of
a.tribunal and leaves it to waste its efforts on affairs, which, given transnational exigencies, will be
reduced to mere academic, if not trivial, exercises.

Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts of law
cases, may refuse impositions on its jurisdiction where it is not the most 'convenient' or available
forum and the parties are not precluded from seeking remedies elsewhere."67 In Puyat v.
Zabarte,68 this court recognized the following situations as among those that may warrant a court's
desistance from exercising jurisdiction: chanroblesvirtuallawlibrary

1) The belief that the matter can be better tried and decided elsewhere, either because the main aspects of the
case transpired in a foreign jurisdiction or the material witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known as forum shopping[,] merely
to secure procedural advantages or to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non residents or aliens when the docket may already
be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right sought to be maintained; and
5) The difficulty of ascertaining foreign law.69
In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,70 this court
underscored that a Philippine court may properly assume jurisdiction over a case if it chooses to do
so to the extent: "(1) that the Philippine Court is one to which the parties may conveniently resort
to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the
facts; and (3) that the Philippine Court has or is likely to have power to enforce its decision."71

The use of the word "may" (i.e., "may refuse impositions on its jurisdiction"72) in the decisions shows
that the matter of jurisdiction rests on the sound discretion of a court. Neither the mere invocation
of forum non conveniens nor the averment of foreign elements operates to automatically divest a
court of jurisdiction. Rather, a court should renounce jurisdiction only "after 'vital facts are
established, to determine whether special circumstances' require the court's desistance."73 As the
propriety of applying forum non conveniens is contingent on a factual determination, it is, therefore,
a matter of defense.74

The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil Procedure is exclusive in its

Labor II – 1
recital of the grounds for dismissal that are exempt from the omnibus motion rule: (1) lack of
jurisdiction over the subject matter; (2) litis pendentia; (3) res judicata; and (4) prescription.
Moreover, dismissal on account offorum non conveniens is a fundamentally discretionary matter. It
is, therefore, not a matter for a defendant to foist upon the court at his or her own convenience;
rather, it must be pleaded at the earliest possible opportunity.

On the matter of pleading forum non conveniens, we state the rule, thus: Forum non conveniens
must not only be clearly pleaded as a ground for dismissal; it must be pleaded as such at the earliest
possible opportunity. Otherwise, it shall be deemed waived.

This court notes that in Hasegawa,76 this court stated that forum non conveniens is not a ground for a
motion to dismiss. The factual ambience of this case however does not squarely raise the viability of
this doctrine. Until the opportunity comes to review the use of motions to dismiss for parallel
litigation, Hasegawa remains existing doctrine.

Consistent with forum non conveniens as fundamentally a factual matter, it is imperative that it

proceed from & factually established basis. It would be improper to dismiss an action pursuant
to forum non conveniens based merely on a perceived, likely, or hypothetical multiplicity of fora.
Thus, a defendant must also plead and show that a prior suit has, in fact, been brought in another
jurisdiction.

The existence of a prior suit makes real the vexation engendered by duplicitous litigation, the
embarrassment of intruding into the affairs of another sovereign, and the squandering of judicial
efforts in resolving a dispute already lodged and better resolved elsewhere. As has been noted: chanroblesvirtuallawlibrary

A case will not be stayed o dismissed on [forum] non conveniens grounds unless the plaintiff is
shown to have an available alternative forum elsewhere. On this, the moving party bears the burden
of proof.

A number of factors affect the assessment of an alternative forum's adequacy. The statute of
limitations abroad may have run, of the foreign court may lack either subject matter or personal
jurisdiction over the defendant. . . . Occasionally, doubts will be raised as to the integrity or
impartiality of the foreign court (based, for example, on suspicions of corruption or bias in favor of
local nationals), as to the fairness of its judicial procedures, or as to is operational efficiency (due, for
example, to lack of resources, congestion and delay, or interfering circumstances such as a civil
unrest). In one noted case, [it was found] that delays of 'up to a quarter of a century' rendered the
foreign forum... inadequate for these purposes.77 cralawlawlibrary

We deem it more appropriate and in the greater interest of prudence that a defendant not only allege
supposed dangerous tendencies in litigating in this jurisdiction; the defendant must also show that
such danger is real and present in that litigation or dispute resolution has commenced in another
jurisdiction  and  that a foreign tribunal has chosen to exercise jurisdiction.

III

Forum non conveniens finds no application and does not operate to divest Philippine tribunals of
jurisdiction and to require the application of foreign law.

Saudia invokes forum non conveniens to supposedly effectuate the stipulations of the Cabin
Attendant contracts that require the application of the laws of Saudi Arabia.

Forum non conveniens relates to forum, not to the choice of governing law. Thai forum non
conveniens may ultimately result in the application of foreign law is merely an incident of its
application. In this strict sense, forum non conveniens is not applicable. It is not the primarily pivotal
consideration in this case.

In any case, even a further consideration of the applicability of forum non conveniens on the
Labor II – 1
incidental matter of the law governing respondents' relation with Saudia leads to the conclusion that
it is improper for Philippine tribunals to divest themselves of jurisdiction.

Any evaluation of the propriety of contracting parties' choice of a forum and'its incidents must
grapple with two (2) considerations: first, the availability and adequacy of recourse to a foreign
tribunal; and second, the question of where, as between the forum court and a foreign court, the
balance of interests inhering in a dispute weighs more heavily.

The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to a foreign tribunal
and can be resolved by juxtaposing the competencies and practical circumstances of the tribunals in
alternative fora. Exigencies, like the statute of limitations, capacity to enforce orders and judgments,
access to records, requirements for the acquisition of jurisdiction, and even questions relating to the
integrity of foreign courts, may render undesirable or even totally unfeasible recourse to a foreign
court. As mentioned, we consider it in the greater interest of prudence that a defendant show, in
pleading forum non conveniens, that litigation has commenced in another jurisdiction and that a
foieign tribunal has, in fact, chosen to exercise jurisdiction.

Two (2) factors weigh into a court's appraisal of the balance of interests inhering in a dispute: first,
the vinculum which the parties and their relation have to a given jurisdiction; and second, the public
interest that must animate a tribunal, in its capacity as an agent of the sovereign, in choosing to
assume or decline jurisdiction. The first is more concerned with the parties, their personal
circumstances, and private interests; the second concerns itself with the state and the greater social
order.

In considering the vinculum, a court must look into the preponderance of linkages which the parties
and their transaction may have to either jurisdiction. In this respect, factors, such as the parties'
respective nationalities and places of negotiation, execution, performance, engagement or
deployment, come into play.

In considering public interest, a court proceeds with a consciousness that it is an organ of the state.
It must, thus, determine if the interests of the sovereign (which acts through it) are outweighed by
those of the alternative jurisdiction. In this respect, the court delves into a consideration of public
policy. Should it find that public interest weighs more heavily in favor of its assumption of
jurisdiction, it should proceed in adjudicating the dispute, any doubt or .contrary view arising from
the preponderance of linkages notwithstanding.

Our law on contracts recognizes the validity of contractual choice of law provisions. Where such
provisions exist, Philippine tribunals, acting as the forum court, generally defer to the parties'
articulated choice.

This is consistent with the fundamental principle of autonomy of contracts. Article 1306 of the Civ:l
Code expressly provides that "[t]he contracting parties may establish 'such stipulations, clauses,
terms and conditions as they may deem convenient."78 Nevertheless, while a Philippine tribunal
(acting as the forum court) is called upon to respect the parties' choice of governing law, such
respect must not be so permissive as to lose sight of considerations of law, morals, good customs,
public order, or public policy that underlie the contract central to the controversy.

Specifically with respect to public policy, in Pakistan International Airlines Corporation v. Ople,79 this
court explained that: chanroblesvirtuallawlibrary

counter-balancing the principle of autonomy of contracting parties is the equally general rule that
provisions of applicable law, especially provisions relating to matters affected with public policy, are
deemed written inta the contract. Put a little differently, the governing principle is that parties may
not contract away applicable provisions of law especially peremptory provisions dealing with matters
heavily impressed with public interest.80 (Emphasis supplied)

Labor II – 1
Article II, Section 14 of the 1987 Constitution provides that "[t]he State ... shall ensure the
fundamental equality before the law of women and men." Contrasted with Article II, Section 1 of the
1987 Constitution's statement that "[n]o person shall ... be denied the equal protection of the laws,"
Article II, Section 14 exhorts the State to "ensure." This does not only mean that the Philippines shall
not countenance nor lend legal recognition and approbation to measures that discriminate on the
basis of one's being male or female. It imposes an obligation to actively engage in securing the
fundamental equality of men and women.

The Convention on the Elimination of all Forms of Discrimination against Women (CEDAW), signed
and ratified by the Philippines on July 15, 1980, and on August 5, 1981, respectively,81 is part of the
law of the land. In view of the widespread signing and ratification of, as well as adherence (in
practice) to it by states, it may even be said that many provisions of the CEDAW may have become
customary international law. The CEDAW gives effect to the Constitution's policy statement in Article
II, Section 14. Article I of the CEDAW defines "discrimination against women" as: chanroblesvirtuallawlibrary

any distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of
impairing or nullifying the recognition, enjoyment or exercise by women, irrespective of their marital
status, on a basis of equality of men and women, of human rights and fundamental freedoms in the
political, economic, social, cultural, civil or any other field.82
cralawlawlibrary

The constitutional exhortation to ensure fundamental equality, as illumined by its enabling law, the
CEDAW, must inform and animate all the actions of all personalities acting on behalf of the State. It
is, therefore, the bounden duty of this court, in rendering judgment on the disputes brought before
it, to ensure that no discrimination is heaped upon women on the mere basis of their being women.
This is a point so basic and central that all our discussions and pronouncements — regardless of
whatever averments there may be of foreign law — must proceed from this premise.

So informed and animated, we emphasize the glaringly discriminatory nature of Saudia's policy. As
argued by respondents, Saudia's policy entails the termination of employment of flight attendants
who become pregnant. At the risk of stating the obvious, pregnancy is an occurrence that pertains
specifically to women. Saudia's policy excludes from and restricts employment on the basis of no
other consideration but sex.

We do not lose sight of the reality that pregnancy does present physical limitations that may render
difficult the performance of functions associated with being a flight attendant. Nevertheless, it would
be the height of iniquity to view pregnancy as a disability so permanent and immutable that, it must
entail the termination of one's employment. It is clear to us that any individual, regardless of gender,
may be subject to exigencies that limit the performance of functions. However, we fail to appreciate
how pregnancy could be such an impairing occurrence that it leaves no other recourse but the
complete termination of the means through which a woman earns a living.

Apart from the constitutional policy on the fundamental equality before the law of men and women, it
is settled that contracts relating to labor and employment are impressed with public interest. Article
1700 of the Civil Code provides that "[t]he relation between capital and labor are not merely
contractual. They are so impressed with public interest that labor contracts must yield to the
common good."

Consistent with this, this court's pronouncements in Pakistan International Airlines Corporation83 are
clear and unmistakable: chanroblesvirtuallawlibrary

Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies,
firstly, the law of Pakistan as the applicable law of the agreement, and, secondly, lays the venue for
settlement of any dispute arising out of or in connection with the agreement "only [in] courts of
Karachi, Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the application of
Philippine labor laws and'regulations to the subject matter of this case, i.e., the employer-employee
relationship between petitioner PIA and private respondents. We have already pointed out that the
relationship is much affected with public interest and that the otherwise applicable Philippine laws
and regulations cannot be rendered illusory by the parties agreeing upon some other law to govern
Labor II – 1
their relationship. . . . Under these circumstances, paragraph 10 of the employment agreement
cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested upon
them by Philippine law.84 (Emphasis supplied)
As the present dispute relates to (what the respondents allege to be) the illegal termination of
respondents' employment, this case is immutably a matter of public interest and public policy.
Consistent with clear pronouncements in law and jurisprudence, Philippine laws properly find
application in and govern this case. 'Moreover, as this premise for Saudia's insistence on the
application forum non conveniens has been shattered, it follows that Philippine tribunals may
properly assume jurisdiction over the present controversy. Philippine jurisprudence provides ample
illustrations of when a court's renunciation of jurisdiction on account of forum non conveniens is
proper or improper.'

In Philsec Investment Corporation v. Court of Appeals,85 this court noted that the trial court failed to
consider that one of the plaintiffs was a domestic corporation, that one of the defendants was a
Filipino, and that it was the extinguishment of the latter's debt that was the object of the transaction
subject of the litigation. Thus, this court held, among others, that the trial court's refusal to assume
jurisdiction was not justified by forum non conveniens and remanded the case to the trial court.

In Raytheon International, Inc. v. Rouzie, Jr.,86 this court sustained the trial court's assumption of
jurisdiction considering that the trial court could properly enforce judgment on the petitioner which
was a foreign corporation licensed to do business in the Philippines.

In Pioneer International, Ltd. v. Guadiz, Jr.,87 this court found no reason to disturb the trial court's
assumption of jurisdiction over a case in which, as noted by the trial court, "it is more convenient to
hear and decide the case in the Philippines because Todaro [the plaintiff] resides in the Philippines
and the contract allegedly breached involve[d] employment in the Philippines."88

In Pacific Consultants International Asia, Inc. v. Schonfeld,89 this court held that the fact that the
complainant in an illegal dismissal case was a Canadian citizen and a repatriate did not warrant the
application of forum non conveniens considering that: (1) the Labor Code does not include forum non
conveniens as a ground for the dismissal of a complaint for illegal dismissal; (2) the propriety of
dismissing a case based on forum non conveniens requires a factual determination; and (3) the
requisites for assumption of jurisdiction as laid out in Bank of America, NT&SA90 were all satisfied.

In contrast, this court ruled in The Manila Hotel Corp. v. National Labor Relations Commission 91 that
the National Labor Relations Q Commission was a seriously inconvenient forum. In that case, private
respondent Marcelo G. Santos was working in the Sultanate of Oman when he received a letter from
Palace Hotel recruiting him for employment in Beijing, China. Santos accepted the offer.
Subsequently, however, he was released from employment supposedly due to business reverses
arising from political upheavals in China (i.e., the Tiananmen Square incidents of 1989). Santos later
filed a Complaint for illegal dismissal impleading Palace Hotel's General Manager, Mr. Gerhard
Schmidt, the Manila Hotel International Company Ltd. (which was, responsible for training Palace
Hotel's personnel and staff), and the Manila Hotel Corporation (which owned 50% of Manila Hotel
International Company Ltd.'s capital stock).

In ruling against the National Labor Relations Commission's exercise of jurisdiction, this court noted
that the main aspects of the case transpired in two (2) foreign jurisdictions, Oman and China, and
that the case involved purely foreign elements. Specifically, Santos was directly hired by a foreign
employer through correspondence sent to Oman. Also, the proper defendants were neither Philippine
nationals nor engaged in business in the Philippines, while the main witnesses were not residents of
the Philippines. Likewise, this court noted that the National Labor Relations Commission was in no
position to conduct the following: first, determine the law governing the employment contract, as it
was entered into in foreign soil; second, determine the facts, as Santos' employment was terminated
in Beijing; and third, enforce its judgment, since Santos' employer, Palace Hotel, was incorporated
under the laws of China and was not even served with summons.
Labor II – 1
Contrary to Manila Hotel, the case now before us does not entail a preponderance of linkages that
favor a foreign jurisdiction.

Here, the circumstances of the parties and their relation do not approximate the circumstances
enumerated in Puyat,92 which this court recognized as possibly justifying the desistance of Philippine
tribunals from exercising jurisdiction.

First, there is no basis for concluding that the case can be more conveniently tried elsewhere. As
established earlier, Saudia is doing business in the Philippines. For their part, all four (4) respondents
are Filipino citizens maintaining residence in the Philippines and, apart from their previous
employment with Saudia, have no other connection to the Kingdom of Saudi Arabia. It would even be
to respondents' inconvenience if this case were to be tried elsewhere.

Second, the records are bereft of any indication that respondents filed their Complaint in an effort to
engage in forum shopping or to vex and inconvenience Saudia.

Third, there is no indication of "unwillingness to extend local judicial facilities to non-residents or

aliens."93 That Saudia has managed to bring the present controversy all the way to this court proves
this.

Fourth, it cannot be said that the local judicial machinery is inadequate for effectuating the right
sought to be maintained. Summons was properly served on Saudia and jurisdiction over its person
was validly acquired.

Lastly, there is not even room for considering foreign law. Philippine law properly governs the
present dispute.

As the question of applicable law has been settled, the supposed difficulty of ascertaining foreign law
(which requires the application of forum non conveniens) provides no insurmountable inconvenience
or special circumstance that will justify depriving Philippine tribunals of jurisdiction.

Even if we were to assume, for the sake of discussion, that it is the laws of Saudi Arabia which should
apply, it does not follow that Philippine tribunals should refrain from exercising jurisdiction. To. recall
our pronouncements in Puyat,94 as well as in Bank of America, NT&SA,95 it is not so much the mere
applicability of foreign law which calls into operation forum non conveniens. Rather, what justifies a
court's desistance from exercising jurisdiction is "[t]he difficulty of ascertaining foreign law"96 or the
inability of a "Philippine Court to make an intelligent decision as to the law[.]"97

Consistent with lex loci intentionis, to the extent that it is proper and practicable (i.e., "to make an
intelligent decision"98), Philippine tribunals may apply the foreign law selected by the parties. In fact,
(albeit without meaning to make a pronouncement on the accuracy and reliability of respondents'
citation) in this case, respondents themselves have made averments as to the laws of Saudi Arabia.
In their Comment, respondents write: chanroblesvirtuallawlibrary

Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal and unlawful to terminate the
employment of any woman by virtue of pregnancy. The law in Saudi Arabia is even more harsh and
strict [sic] in that no employer can terminate the employment of a female worker or give her a
warning of the same while on Maternity Leave, the specific provision of Saudi Labor Laws on the
matter is hereto quoted as follows: chanroblesvirtuallawlibrary

"An employer may not terminate the employment of a female worker or give her a warning of the
same while on maternity leave." (Article 155, Labor Law of the Kingdom of Saudi Arabia, Royal
Decree No. M/51.)99 cralawlawlibrary

All told, the considerations for assumption of jurisdiction by Philippine tribunals as outlined in Bank of
America, NT&SA100 have been satisfied. First, all the parties are based in the Philippines and all the
material incidents transpired in this jurisdiction. Thus, the parties may conveniently seek relief from
Labor II – 1
Philippine tribunals. Second, Philippine tribunals are in a position to make an intelligent decision as to
the law and the facts. Third, Philippine tribunals are in a position to enforce their decisions. There is
no compelling basis for ceding jurisdiction to a foreign tribunal. Quite the contrary, the immense
public policy considerations attendant to this case behoove Philippine tribunals to not shy away from
their duty to rule on the case. chanRoblesvirtualLawlibrary

IV

Respondents were illegally terminated.

In Bilbao v. Saudi Arabian Airlines,101 this court defined voluntary resignation as "the voluntary act of
an employee who is in a situation where one believes that personal reasons cannot be sacrificed in
favor of the exigency of the service, and one has no other choice but to dissociate oneself from
employment. It is a formal pronouncement or relinquishment of an office, with the intention of
relinquishing the office accompanied by the act of relinquishment."102 Thus, essential to the act of
resignation is voluntariness. It must be the result of an employee's exercise of his or her own will.

In the same case of Bilbao, this court advanced a means for determining whether an employee
resigned voluntarily:chanroblesvirtuallawlibrary

As the intent to relinquish must concur with the overt act of relinquishment, the acts of the employee
before and after the alleged resignation must be considered in determining whether he or she, in
fact, intended, to sever his or her employment.103 (Emphasis supplied)
On the other hand, constructive dismissal has been defined as "cessation of work because 'continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in
rank or a diminution in pay' and other benefits."104

In Penaflor v. Outdoor Clothing Manufacturing Corporation,105 constructive dismissal has been

described as tantamount to "involuntarily [sic] resignation due to the harsh, hostile, and unfavorable
conditions set by the employer."106 In the same case, it was noted that "[t]he gauge for constructive
dismissal is whether a reasonable person in the employee's position would feel compelled to give up
his employment under the prevailing circumstances."107

Applying the cited standards on resignation and constructive dismissal, it is clear that respondents
were constructively dismissed. Hence, their termination was illegal.

The termination of respondents' employment happened when they were pregnant and expecting to
incur costs on account of child delivery and infant rearing. As noted by the Court of Appeals,
pregnancy is a time when they need employment to sustain their families.108 Indeed, it goes against
normal and reasonable human behavior to abandon one's livelihood in a time of great financial need.

It is clear that respondents intended to remain employed with Saudia. All they did was avail of their
maternity leaves. Evidently, the very nature of a maternity leave means that a pregnant employee
will not report for work only temporarily and that she will resume the performance of her duties as
soon as the leave allowance expires.

It is also clear that respondents exerted all efforts to' remain employed with Saudia. Each of them
repeatedly filed appeal letters (as much as five [5] letters in the case of Rebesencio109) asking Saudia
to reconsider the ultimatum that they resign or be terminated along with the forfeiture of their
benefits. Some of them even went to Saudia's office to personally seek reconsideration.110

Respondents also adduced a copy of the "Unified Employment Contract for Female Cabin
Attendants."111 This contract deemed void the employment of a flight attendant who becomes
pregnant and threatened termination due to lack of medical fitness.112 The threat of termination (and
the forfeiture of benefits that it entailed) is enough to compel a reasonable person in respondents'
Labor II – 1
position to give up his or her employment.

Saudia draws attention to how respondents' resignation letters were supposedly made in their own
handwriting. This minutia fails to surmount all the other indications negating any voluntariness on
respondents' part. If at all, these same resignation letters are proof of how any supposed resignation
did not arise from respondents' own initiative. As earlier pointed out, respondents' resignations were
executed on Saudia's blank letterheads that Saudia had provided. These letterheads already had the
word "RESIGNATION" typed on the subject portion of their respective headings when these were
handed to respondents.113 ChanRoblesVirtualawlibrary

"In termination cases, the burden of proving just or valid cause for dismissing an employee rests on
the employer."114 In this case, Saudia makes much of how respondents supposedly completed their
exit interviews, executed quitclaims, received their separation pay, and took more than a year to file
their Complaint.115 If at all, however, these circumstances prove only the fact of their occurrence,
nothing more. The voluntariness of respondents' departure from Saudia is non sequitur.

Mere compliance with standard procedures or processes, such as the completion of their exit
interviews, neither negates compulsion nor indicates voluntariness.

As with respondent's resignation letters, their exit interview forms even support their claim of illegal
dismissal and militates against Saudia's arguments. These exit interview forms, as reproduced by
Saudia in its own Petition, confirms the unfavorable conditions as regards respondents' maternity
leaves. Ma. Jopette's and Loraine's exit interview forms are particularly telling:
chanroblesvirtuallawlibrary

a. From Ma. Jopette's exit interview form:

    3. In what respects has the job met or failed to meet your expectations?

THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY LEAVE.116

b. From Loraine's exit interview form:

    1. What are your main reasons for leaving Saudia? What company are you joining?

        xxx xxx xxx

        Others

CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY)117

As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc. v. Paramio,118 this court
noted that "[i]f (a) there is clear proof that the waiver was wangled from an unsuspecting or gullible
person; or (b) the terms of the settlement are unconscionable, and on their face invalid, such
quitclaims must be struck down as invalid or illegal."119 Respondents executed their quitclaims after
having been unfairly given an ultimatum to resign or be terminated (and forfeit their benefits). chanRoblesvirtualLawlibrary

Having been illegally and unjustly dismissed, respondents are entitled to full backwages and benefits
from the time of their termination until the finality of this Decision. They are likewise entitled to
separation pay in the amount of one (1) month's salary for every year of service until the fmality of
this Decision, with a fraction of a year of at least six (6) months being counted as one (1) whole
year.

Moreover, "[m]oral damages are awarded in termination cases where the employee's dismissal was
attended by bad faith, malice or fraud, or where it constitutes an act oppressive to labor, or where it
was done in a manner contrary to morals, good customs or public policy."120 In this case, Saudia

Labor II – 1
terminated respondents' employment in a manner that is patently discriminatory and running afoul of
the public interest that underlies employer-employee relationships. As such, respondents are entitled
to moral damages.

To provide an "example or correction for the public good"121 as against such discriminatory and
callous schemes, respondents are likewise entitled to exemplary damages.

In a long line of cases, this court awarded exemplary damages to illegally dismissed employees
whose "dismissal[s were] effected in a wanton, oppressive or malevolent manner."122 This court has
awarded exemplary damages to employees who were terminated on such frivolous, arbitrary, and
unjust grounds as membership in or involvement with labor unions,123 injuries sustained in the course
of employment,124 development of a medical condition due to the employer's own violation of the
employment contract,125 and lodging of a Complaint against the employer.126 Exemplary damages
were also awarded to employees who were deemed illegally dismissed by an employer in an attempt
to evade compliance with statutorily established employee benefits.127 Likewise, employees dismissed
for supposedly just causes, but in violation of due process requirements, were awarded exemplary
damages.128

These examples pale in comparison to the present controversy. Stripped of all unnecessary
complexities, respondents were dismissed for no other reason than simply that they were pregnant.
This is as wanton, oppressive, and tainted with bad faith as any reason for termination of
employment can be. This is no ordinary case of illegal dismissal. This is a case of manifest gender
discrimination. It is an affront not only to our statutes and policies on employees' security of tenure,
but more so, to the Constitution's dictum of fundamental equality between men and women.129

The award of exemplary damages is, therefore, warranted, not only to remind employers of the need
to adhere to the requirements of procedural and substantive due process in termination of
employment, but more importantly, to demonstrate that gender discrimination should in no case be
countenanced.

Having been compelled to litigate to seek reliefs for their illegal and unjust dismissal, respondents
are likewise entitled to attorney's fees in the amount of 10% of the total monetary award.130

VI

Petitioner Brenda J. Betia may not be held liable.

A corporation has a personality separate and distinct from those of the persons composing it. Thus,
as a rule, corporate directors and officers are not liable for the illegal termination of a corporation's
employees. It is only when they acted in bad faith or with malice that they become solidarity liable
with the corporation.131

In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever Electrical,132 this

court clarified that "[b]ad faith does not connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty
through some motive or interest or ill will; it partakes of the nature of fraud."133

Respondents have not produced proof to show that Brenda J. Betia acted in bad faith or with malice
as regards their termination. Thus, she may not be held solidarity liable with Saudia. cralawred

WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J. Betia is not solidarity liable

with petitioner Saudi Arabian Airlines, and second, that petitioner Saudi Arabian Airlines is liable for
moral and exemplary damages. The June 16, 2011 Decision and the September 13, 2011 Resolution
of the Court of Appeals in CA-G.R. SP. No. 113006 are hereby AFFIRMED in all other respects.
Accordingly, petitioner Saudi Arabian Airlines is ordered to pay respondents:
Labor II – 1
(1) Full backwages and all other benefits computed from the respective dates in which each of the
respondents were illegally terminated until the finality of this Decision;
(2) Separation pay computed from the respective dates in which each of the respondents commenced
employment until the finality of this Decision at the rate of one (1) month's salary for every year of
service, with a fraction of a year of at least six (6) months being counted as one (1) whole year;
(3) Moral damages in the amount of P100,000.00 per respondent;
(4) Exemplary damages in the amount of P200,000.00 per respondent; and
(5) Attorney's fees equivalent to 10% of the total award.

Interest of 6% per annum shall likewise be imposed on the total judgment award from the finality of
this Decision until full satisfaction thereof.

This case is REMANDED to the Labor Arbiter to make a detailed computation of the amounts due to
respondents which petitioner Saudi Arabian Airlines should pay without delay.

Labor II – 1
 23.) G.R. No. 214399, June 28, 2016

ARMANDO N. PUNCIA, Petitioner, v. TOYOTA SHAW/PASIG, INC., Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated June 9, 2014 and the
Resolution3 dated September 23, 2014 of the Court of Appeals (CA) in CA-G.R. SP No. 132615, which
annulled and set aside the Decision4 dated February 14, 2013 and the Resolution5 dated August 30,
2013 of the National Labor Relations Commission (NLRC) in NLRC NCR CN. 10-15949-11/NLRC LAC
No. 07-001991-12 and instead, reinstated the Decision6 dated May 4, 2012 of the Labor Arbiter (LA)
finding that respondent Toyota Shaw/Pasig, Inc. (Toyota) validly dismissed petitioner Armando N.
Puncia (Puncia) for just cause.

The Facts

Puncia alleged that since 2004, he worked as a messenger/collector for Toyota and was later on
appointed on March 2, 2011 as a Marketing Professional7 tasked to sell seven (7) vehicles as monthly
quota.8 However, Puncia failed to comply and sold only one (1) vehicle for the month of July and
none for August,9 prompting Toyota to send him a Notice to Explain.10 In reply,11 Puncia stated that
as a trainee, he was only required to sell three (3) vehicles per month; that the month of May has
always been a lean month; and that he was able to sell four (4) vehicles in the month of
September.12 Thereafter, a hearing was conducted but Puncia failed to appear despite notice.13 chanrobleslaw

On October 18, 2011, Toyota sent Puncia a Notice of Termination,14 dismissing him on the ground of
insubordination for his failure to attend the scheduled hearing and justify his absence.15 This
prompted Puncia to file a complaint16 for illegal dismissal with prayer for reinstatement and payment
of backwages, unfair labor practice, damages, and attorney's fees against Toyota and its officers,
claiming, inter alia, that Toyota dismissed him after discovering that he was a director of the Toyota-
Shaw Pasig Workers Union-Automotive Industry Worker's Alliance; and that he was terminated on
the ground of insubordination and not due to his failure to meet his quota as contained in the Notice
to Explain.17 chanrobleslaw

In its defense, Toyota denied the harassment charges and claimed that there was a valid cause to
dismiss Puncia, considering his failure to comply with the company's strict requirements on sales
quota. It likewise stated that Puncia has consistently violated the company rules on attendance and
timekeeping as several disciplinary actions were already issued against him.18 chanrobleslaw

The LA Ruling

In a Decision19 dated May 4, 2012, the LA dismissed Puncia's complaint for lack of merit, but
nevertheless, ordered Toyota to pay Puncia his money claims consisting of his earned commissions,
13th month pay for 2011, sick leave, and vacation leave benefits.20 chanrobleslaw

The LA found that Puncia was dismissed not because of his involvement in the labor union, but was
terminated for a just cause due to his inefficiency brought about by his numerous violations of the
company rules on attendance from 2006 to 2010 and his failure to meet the required monthly
quota.21 This notwithstanding, the LA found Puncia entitled to his money claims, considering that
Toyota failed to deny or rebut his entitlement thereto.22
chanrobleslaw

Aggrieved, Puncia appealed23 to the NLRC.

Labor II – 1
 The NLRC Ruling

In a Decision24 dated February 14, 2013, the NLRC reversed the LA ruling and, accordingly, declared
Puncia to have been illegally dismissed by Toyota, thus, entitling him to reinstatement and
backwages.25  The NLRC found that Toyota illegally dismissed Puncia from employment as there were
cralawred

no valid grounds to justify his termination. Moreover, the NLRC observed that Toyota failed to comply
with the due process requirements as: first, the written notice served on the employee did not
categorically indicate the specific ground for dismissal sufficient to have given Puncia a reasonable
opportunity to explain his side, since the Intra-Company Communication26 providing the company
rules failed to explain in detail that Puncia's deficiency merited the penalty of
dismissal;27 and second, Puncia's dismissal was not based on the same grounds cited in the Notice to
Explain, since the ground indicated was Puncia's failure to meet the sales quota, which is different
from the ground stated in the Notice of Termination, which is his unjustified absence during the
scheduled hearing.28 chanrobleslaw

Both parties filed their separate motions for reconsideration,29 which were denied in a
Resolution30 dated August 30, 2013.

Aggrieved, Toyota filed a Petition for Certiorari31 before the CA, which was docketed as CA-G.R. SP
No. 132615 and was raffled to the First Division (CA-First Division). In the same vein, Puncia filed his
Petition for Certiorari32 before the CA, which was docketed as CA-G.R. SP No. 132674 and was raffled
to the Eleventh Division (CA-Eleventh Division).33chanrobleslaw

The CA Proceedings

In a Resolution34 dated November 29, 2013, the CA-Eleventh Division dismissed outright CA-G.R. SP
No. 132674 on procedural grounds. Consequently, Puncia filed an Omnibus Motion (For Consolidation
and Reconsideration of Order of November 29, 2013)35 and a Supplement to the Omnibus
Motion,36 seeking the consolidation of CA-G.R. SP No. 132674 with CA-G.R. SP No. 132615.

In a Resolution37 dated January 24, 2014, the CA-First Division denied the motion for consolidation
on the ground that CA-G.R. SP No. 132674 was already dismissed by the CA-Eleventh Division.
Thereafter, and while CA-G.R. SP No. 132674 remained dismissed, the CA-First Division
promulgated the assailed Decision38 dated June 9, 2014 (June 9, 2014 Decision) in CA-G.R. SP No.
132615 annulling and setting aside the NLRC ruling and reinstating that of the LA. It held that Toyota
was able to present substantial evidence in support of its contention that there was just cause in
Puncia's dismissal from employment and that it was done in compliance with due process,
considering that: (a) Puncia's repeated failure to meet his sales quota constitutes gross inefficiency
and gross neglect of duties; and (b) Puncia was afforded due process as he was able to submit a
written explanation within the period given to him by Toyota.39 chanrobleslaw

Dissatisfied, Puncia filed a motion for reconsideration,40 which the CA-First Division denied in the
assailed Resolution41 dated September 23, 2014 (September 23, 2014 Resolution).

Meanwhile, in a Resolution42 dated July 22, 2014, the CA-Eleventh Division reconsidered its dismissal
of CA-G.R. SP No. 132674, and accordingly, reinstated the same and ordered Toyota to file its
comment thereto.

In view of the foregoing, Puncia filed the instant petition43 mainly contending that the rulings in CA-
G.R. SP No. 132615, i.e., the assailed June 9, 2014 Decision and September 23, 2014 Resolution,
should be set aside and the case be remanded back to the CA for consolidation with CA-G.R. SP No.
132674 so that both cases will be jointly decided on the merits.44 chanrobleslaw

For its part,45 Toyota maintained that the CA-First Division correctly promulgated its June 9, 2014
Decision in CA-G.R. SP No. 132615, considering that at the time of promulgation, there was no other
Labor II – 1
pending case before the CA involving the same issues and parties as CA-G.R. SP No. 132674 was
dismissed by the CA-Eleventh Division on November 29, 2013, and was only reinstated on July 22,
2014.46chanrobleslaw

The Issues Before the Court

The issues for the Court's resolution are (a) whether or not the CA-First Division correctly
promulgated its June 9, 2014 Decision in CA-G.R. SP No. 132615 without consolidating the same with
CA-G.R. SP No. 132674; and (b) whether or not Puncia was dismissed from employment for just
cause.

The Court's Ruling

The petition is denied.

At the outset, the Court notes that consolidation of cases is a procedure sanctioned by the Rules of
Court for actions which involve a common question of law or fact before the court.47 It is a procedural
device granted to the court as an aid in deciding how cases in its docket are to be tried so that the
business of the court may be dispatched expeditiously and with economy while providing justice to
the parties.48 chanrobleslaw

The rationale for consolidation is to have all cases, which are intimately related, acted upon by one
branch of the court to avoid the possibility of conflicting decisions being rendered49 and in effect,
prevent confusion, unnecessary costs,50 and delay.51 It is an action sought to avoid multiplicity of
suits; guard against oppression and abuse; clear congested dockets; and to simplify the work of the
trial court in order to attain justice with the least expense and vexation to the parties-litigants.52 chanrobleslaw

In order to determine whether consolidation is proper, the test is to check whether the cases involve
the resolution of common questions of law, related facts,53 or the same parties.54 Consolidation is
proper whenever the subject matter involved and the relief demanded in the different suits make it
expedient for the court to determine all of the issues involved and adjudicate the rights of the parties
by hearing the suits together.55However, it must be stressed that an essential requisite of
consolidation is that the several actions which should be pending before the court, arise
from the same act, event or transaction, involve the same or like issues, and depend
largely or substantially on the same evidence.56 As succinctly stated in the rules, consolidation is
allowed when there are similar actions which are pending before the court 57 - for there is
nothing to consolidate when a matter has already been resolved and the very purpose of
consolidation, to avoid conflicting decisions and multiplicity of suits, rendered futile. The Court's
pronouncement in Honoridez v. Mahinay,58 is instructive on this matter, to wit: ChanRoblesVirtualawlibrary

Petitioners attempt to revive the issues in Civil Case No. CEB-16335 by moving for the consolidation
of the same with Civil Case No. CEB-23653. Under Section 1, Rule 31 of the Rules of Court, only
pending actions involving a common question of law or fact may be consolidated. Obviously,
petitioners cannot make out a case for consolidation in this case since Civil Case No. CEB-16335, the
case which petitioners seek to consolidate with the case a quo, has long become final and executory;
as such, it cannot be re-litigated in the instant proceedings without virtually impeaching the
correctness of the decision in the other case. Public policy abhors such eventuality.59 (Emphasis and
underscoring supplied)
In the instant case, while there were indeed two (2) separate petitions filed before the CA assailing
the Decision dated February 14, 2013 and the Resolution dated August 30, 2013 of the NLRC in NLRC
NCR CN. 10-15949-11/NLRC LAC No. 07-001991-12, i.e., CA-G.R. SP No. 132615 and CA-G.R. SP
No. 132674, it must nevertheless be stressed that CA-G.R. SP No. 132674 was dismissed by the CA-
Eleventh Division as early as November 29, 2013 due to procedural grounds. This fact was even
pointed out by the CA-First Division in its Resolution60 dated January 24, 2014 when it held that CA-
G.R. SP No. 132674 could no longer be consolidated with CA-G.R. SP No. 132615 since the former
case had already been dismissed. From that point until the CA-First Division's promulgation of the
Labor II – 1
assailed June 9, 2014 Decision in CA-G.R. SP No. 132615, no consolidation between CA-G.R. SP No.
132615 and CA-G.R. SP No. 132674 could take place mainly because the latter case remained
dismissed during that time. In other words, when the CA-First Division promulgated its ruling in CA-
G.R. SP No. 132615, it was the one and only case pending before the CA assailing the aforesaid
NLRC rulings. Therefore, the CA-First Division acted within the scope of its jurisdiction when it
promulgated its ruling in CA-G.R. SP No. 132615 without having the case consolidated with CA-G.R.
SP No. 132674, notwithstanding the latter case's reinstatement after said promulgation.

It should be emphasized that the consolidation of cases is aimed to simplify the proceedings as it
contributes to the swift dispensation of justice.61 As such, it is addressed to the sound discretion of
the court and the latter's action in consolidation will not be disturbed in the absence of manifest
abuse of discretion tantamount to an evasion of a positive duty or a refusal to perform a duty
enjoined by law,62 which is absent in this case.

The foregoing notwithstanding, the Court deems it appropriate to look into the issue of the validity of
Puncia's dismissal so as to finally resolve the main controversy at hand.

In his petition, Puncia insists that the CA gravely erred in upholding his dismissal, considering that
the administrative proceeding against him was due to his failure to meet his monthly sales quota, but
he was dismissed on the ground of gross insubordination.63 On the other hand, Toyota maintains that
the CA correctly declared Puncia's termination to be valid and in compliance with due process.64 chanrobleslaw

It is settled that "for a dismissal to be valid, the rule is that the employer must comply with both
substantive and procedural due process requirements. Substantive due process requires that the
dismissal must be pursuant to either a just or an authorized cause under Articles 297, 298 or 299
(formerly Articles 282, 283, and 284)65 of the Labor Code. Procedural due process, on the other
hand, mandates that the employer must observe the twin requirements of notice and hearing before
a dismissal can be effected."66 Thus, to determine the validity of Puncia's dismissal, there is a need to
discuss whether there was indeed just cause for his termination.

In the instant case, records reveal that as a Marketing Professional for Toyota, Puncia had a monthly
sales quota of seven (7) vehicles from March 2011 to June 2011. As he was having trouble complying
with said quota, Toyota even extended him a modicum of leniency by lowering his monthly sales
quota to just three (3) vehicles for the months of July and August 2011; but even then, he still failed
to comply.67 In that six (6)-month span, Puncia miserably failed in satisfying his monthly sales quota,
only selling a measly five (5) vehicles out of the 34 he was required to sell over the course of said
period. Verily, Puncia's repeated failure to perform his duties - i.e., reaching his monthly sales
quota - for such a period of time falls under the concept of gross inefficiency. In this regard,
case law instructs that "gross inefficiency" is analogous to "gross neglect of duty," a just
cause of dismissal under Article 297 of the Labor Code, for both involve specific acts of omission on
the part of the employee resulting in damage to the employer or to his business.68 In Aliling v.
Feliciano,69 the Court held that an employer is entitled to impose productivity standards for its
employees, and the latter's non-compliance therewith can lead to his termination from
work, viz.: ChanRoblesVirtualawlibrary

[T]he practice of a company in laying off workers because they failed to make the work quota has
been recognized in this jurisdiction, x x x. In the case at bar, the petitioners' failure to meet the
sales quota assigned to each of them constitute a just cause of their dismissal, regardless of
the permanent or probationary status of their employment. Failure to observe prescribed
standards of work, or to fulfill reasonable work assignments due to inefficiency may
constitute just cause for dismissal. Such inefficiency is understood to mean failure to
attain work goals or work quotas, either by failing to complete the same within the
allotted reasonable period, or by producing unsatisfactory results. 70 (Emphases and
underscoring supplied)
Indisputably, Toyota complied with the substantive due process requirement as there was
indeed just cause for Puncia's termination.
Labor II – 1
Anent the issue of procedural due process, Section 2 (I), Rule XXIII, Book V of the Omnibus Rules
Implementing the Labor Code71 provides for the required standard of procedural due process
accorded to employees who stand to be terminated from work, to wit: ChanRoblesVirtualawlibrary

Section 2. Standards of due process; requirements of notice. - In all cases of termination of

employment, the following standards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 [now Article 297]
chanRoblesvirtualLawlibrary

of the Labor Code:

chanRoblesvirtualLawlibrary

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

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

(c) A written notice of termination served on the employee indicating that upon due consideration of
all the circumstances, grounds have been established to justify his termination.
The foregoing standards were then further refined in Unilever Philippines, Inc. v. Rivera 72 as
follows: ChanRoblesVirtualawlibrary

To clarify, the following should be considered in terminating the services of employees:

(1) The first written notice to be served on the employees should contain the specific
chanRoblesvirtualLawlibrary

causes or grounds for termination against them, and a directive that the employees are given
the opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management must accord
to the employees to enable them to prepare adequately for their defense. This should be construed
as a period of at least five (5) calendar days from receipt of the notice to give the employees an
opportunity to study the accusation against them, consult a union official or lawyer, gather data and
evidence, and decide on the defenses they will raise against the complaint. Moreover, in order to
enable the employees to intelligently prepare their explanation and defenses, the notice
should contain a detailed narration of the facts and circumstances that will serve as basis
for the charge against the employees. A general description of the charge will not
suffice. Lastly, the notice should specifically mention which company rules, if any, are violated
and/or which among the grounds under Art. 282 is being charged against the employees.

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

(3) After determining that termination of employment is justified, the employers shall

serve the employees a written notice of termination indicating that: (1) all circumstances
involving the charge against the employees have been considered; and (2) grounds have
been established to justify the severance of their employment. 73 (Emphases and underscoring
supplied)
In this case, at first glance it seemed like Toyota afforded Puncia procedural due process, considering
that: (a) Puncia was given a Notice to Explain;74 (b) Toyota scheduled a hearing on October 17, 2011
regarding the charge stated in the Notice to Explain;75 (c) on the date of the hearing, Puncia was able
to submit a letter76 addressed to Toyota's vehicle sales manager explaining his side, albeit he failed
to attend said hearing; and (d) Toyota served a written Notice of Termination77 informing Puncia of
Labor II – 1
his dismissal from work. However, a closer look at the records reveals that in the Notice to
Explain, Puncia was being made to explain why no disciplinary action should be imposed
upon him for repeatedly failing to reach his monthly sales quota, which act, as already
adverted to earlier, constitutes gross inefficiency. On the other hand, a reading of the
Notice of Termination shows that Puncia was dismissed not for the ground stated in the
Notice to Explain, but for gross insubordination on account of his non-appearance in the
scheduled October 17, 2011 hearing without justifiable reason. In other words, while Toyota afforded
Puncia the opportunity to refute the charge of gross inefficiency against him, the latter was
completely deprived of the same when he was dismissed for gross insubordination - a completely
different ground from what was stated in the Notice to Explain. As such, Puncia's right to procedural
due process was violated.

Hence, considering that Toyota had dismissed Puncia for a just cause, albeit failed to comply with the
proper procedural requirements, the former should pay the latter nominal damages in the amount of
P30,000.00 in accordance with recent jurisprudence.78 chanrobleslaw

WHEREFORE, the petition is DENIED. The Decision dated June 9, 2014 and the Resolution dated
September 23, 2014 of the Court of Appeals in CA-G.R. SP No. 132615 are
hereby AFFIRMED with MODIFICATION in that respondent Toyota Shaw/Pasig, Inc.
is ORDERED to indemnify petitioner Armando N. Puncia nominal damages in the amount of
P30,000.00 for dismissing the latter in violation of his right to procedural due process, but for a just
cause.

Labor II – 1
 24.) G.R. No. 198066, June 07, 2017

YOLANDO T. BRAVO, Petitioner, v. URIOS COLLEGE (NOW FATHER SATURNINO URIOS

UNIVERSITY) AND/OR FR. JOHN CHRISTIAN U. YOUNG, Respondents.

DECISION

LEONEN, J.:

The employer must adduce proof of actual involvement in the alleged misconduct for loss of trust and
confidence to warrant the dismissal of fiduciary rank-and-file employees. However, "mere existence
of a basis for believing that [the] employee has breached the trust [and confidence] of [the]
employer" is sufficient for managerial employees.1

Through this Petition for Review,2 Yolando T. Bravo (Bravo) challenges the Decision3 dated January
31, 2011 and Resolution4 dated July 14, 2011 of the Court of Appeals in CA-G.R. SP No. 02407-MIN.
The Court of Appeals reinstated the Executive Labor Arbiter's decision, which upheld petitioner's
dismissal from service.5

Bravo was employed as a part-time teacher6 in 1988 by Urios College, now called Father Saturnino
Urios University.7 In addition to his duties as a part-time teacher, Bravo was designated as the
school's comptroller from June 1, 2002 to May 31, 2002.8

Urios College organized a committee to formulate a new "ranking system for non-academic
employees for school year 2001-2002." The committee was composed of the Vice-President for
Academic Affairs, Dr. Aldefa Yumo; the Human Resources Department Head, Atty. Josefe C. Sorrera-
Ty; and the Vice-President for Administration, Dr. Wilma Balmocena. "[U]nder [the proposed
ranking] system, the position of Comptroller was classified as an office [h]ead while the position of
Vice-President for Finance was classified as [m]iddle [management."9

The proposed ranking system for school year 2001—2002 was presented to Bravo for
comments.10 Bravo recommended that "the position of Comptroller should be classified as a middle
management position [because it was] . . . informally merged with . . . the position of [V]ice-
[P]resident for [F]inance."11 In addition, the Comptroller and the Vice-President for Finance
performed similar functions, which included follow up of payroll preparation, verification of daily cash
vouchers, and certification of checks issued by the school. Moreover, they were responsible for the
control of checkbooks issuance to the Cashier, preparation of departmental budget guidelines,
supervision of reports and payments to various government agencies, and analysis and interpretation
of financial statements.12 Bravo further suggested that since he assumed the duties of Comptroller
and Vice-President for Finance, his salary scale should be upgraded.13

The committee allegedly agreed with Bravo and accepted his recommendations.14 Bravo was then
directed to arrange a salary adjustment schedule for the new ranking system.15

Later, Bravo obtained his employee ranking slip which showed his evaluation score and the change of
his rank "from office head to middle manager-level IV."16 The change, however, was merely
superimposed. The employee ranking slip bore the signatures of the Human Resources Department
Head, the Vice-President for Administration, and the President of Urios College.17

The implementation of the new ranking system for non-academic employees and administrators for
school year 2001-2002 and the corresponding schedule of salary adjustments were reflected on the
October 15, 2001 payroll. This was opposed by several individuals within the school.18

Labor II – 1
Urios College formed another committee to adopt a new ranking system for school year 2002-2003.
After deliberation, the committee decided to maintain the ranking system used in the previous school
year for school year 2002-2003. In the employee's ranking profile report, the position of Comptroller
was classified as middle management.19

Meanwhile, Urios College decided to undertake a structural reorganization.20 During this period, Bravo
occupied the Comptroller position in a "hold-over" capacity until May 31, 2003. He was reappointed
to the same position, which expired on May 31, 2004. Bravo was then designated as a full-time
teacher21 in the college department for school year 2004-2005.22

In October 2004, Urios College organized a committee to review the ranking system implemented
during school year 2001-2002.23 In its report, the committee found that the ranking system for
school year 2001-2002 caused salary distortions among several employees.24 There were
also discrepancies in the salary adjustments of Bravo and of two (2) other employees,
namely, Nena A. Turgo and Cherry I. Tabada.25 The committee discovered that "the
Comptroller's Office solely prepared and implemented the [s]alary [a]djustment
[s]chedule" without prior approval from the Human Resources Department.26

The committee recommended, among others, that Bravo be administratively charged for
serious misconduct or willful breach of trust under Article 28227 of the Labor Code.28 Bravo
allegedly misclassified several positions and miscomputed his and other employees' salaries.29

On March 16, 2005, Bravo received a show cause memo requiring him to explain in writing why his
services should not be terminated for his alleged acts of serious misconduct:

The committee noted a discrepancy in the Schedule of Salary Adjustments, the implementation of
which was entirely based on the computation that was then the responsibility of your office
(Comptroller). For this reason, you are advised to explain or show cause why your employment with
Urios College will not be terminated for Serious Misconduct due to intentional
misclassification/miscomputation of your salary and some employees named hereunder, thereby
causing prejudice not only to the school but also to said employees as well.

1. As Comptroller then, you belong to Office Pleads classification. However, in the

Schedule of Salary Adjustment, you are misclassified as Middle Manager, that resulted
to overpayment in your salary by PhP 3,651.76 per month since June 2001.

Also, having passed the comprehensive exam and oral defense for your master's
degree, your salary adjustment based on your educational qualification ought to be is
(sic) PhP 800.00 only. However, what is reflected in the Schedule of Salary Adjustment
is PhP 1,000.00, which amount is appropriately given to Master's Degree holders.
Considering that you have not even finished the degree up to the present, such
circumstance resulted to overpayment in your salary by PhP 200.00 per month since
June 2001.

This means that you have been receiving a monthly salary more than what is due to
you. The overpayment therefore of PhP 3,851.76 per month (PhP 3,651.76 plus PhP
200.00) from June 2001 up to February 2005 presently amounts to PhP 185,131.34.

2. As Community Extension Service Officer then, Mrs. Nena A. Turgo belongs to Office
Heads classification. However, in the Schedule of Salary Adjustment, she was
misclassified as Office Staff, which resulted to underpayment by PhP 2,888.99 on her
monthly salary. From June 2001 to February 2005 the underpayment is in the total
amount of PhP 140,356.76.

Labor II – 1
 3. Ms. Cherry I. Tabada only passed the comprehensive examination for Master of Arts in
Educational Management in Urios College. This entitled her [to] PhP 500.00 adjustment
in salary due to Educational Qualification (E.Q.). However, what is reflected in the
Schedule of Salary Adjustment is PhP 1,000.00, which resulted to overpayment in
salary by PhP 500.00 from June 2001 to March 2003, or in the total amount of PhP
11,000.00.

The foregoing actuations would necessarily affect your character as a teacher in the Commerce
Program, and as an employee of the school, whose honesty and integrity ought to be beyond
reproach to serve as role model for the students in this institution.

We are therefore requesting for your written explanation relative to these matters within three (3)
days from receipt of this memorandum. Documentary evidence, if there be any, [may be] attached
to the written explanation. You may avail the aid of a legal counsel.

Your failure to submit your written explanation as requested will be construed as a waiver on your
part, as a consequence of which the school may take such appropriate action on the bases of the
available records in connection with the matters made subject of this memorandum.

For your compliance.30

A committee was organized to investigate the matter.31 Hearings were conducted on April 5, 2005,
April 9, 2005, and once in May 2005, after which the parties submitted their respective position
papers.32 In his Position Paper, Bravo alleged that he did not prepare the ranking system for school
year 2001-2002. It was the ranking committee which categorized the position of Comptroller as
middle management.33

The committee found that Bravo floated the idea of his salary adjustment, which Urios College never
formally approved.34 The committee also discovered an irregularity in the implementation of the
ranking system for school year 2001—2002.35 Flordeliz V. Rosero (Rosero) of the Human Resources
Department attested that Bravo failed to follow the school's protocol in computing employees'
salaries.36

According to Rosero, the Human Resources Department would prepare a summary table for each
department containing the names of employees, their respective ranks, and the points they earned
from their regular evaluation.37 The accomplished summary tables were forwarded to the
Comptroller's Office, which would then designate each employee's salary based on a salary
scale.38 When the ranking system for school year 2001-2002 was implemented, the Comptroller's
Office prepared its own summary table,39 which did not indicate each employee's rank or bear the
signature of the Human Resources Department Head.40

Bravo was found guilty of serious misconduct for which he was ordered to return the sum of
P179,319.16, representing overpayment of his monthly salary.41 He received a copy of the
investigation committee's decision on July 15, 2005.42

On July 25, 2005, Urios College notified Bravo of its decision to terminate his services 43 for
serious misconduct and loss of trust and confidence.44 Upon receipt of the termination letter,
Bravo immediately filed before Executive Labor Arbiter Benjamin E. Pelaez (Executive Labor Arbiter
Pelaez) a complaint for illegal dismissal with a prayer for the payment of separation pay, damages,
and attorney's fees.45

In the Decision46 dated December 27, 2005, Executive Labor Arbiter Pelaez dismissed the complaint
for lack of merit.47 Bravo's act of "assigning to himself an excessive and unauthorized salary rate
while working as a [C]omptroller" constituted serious misconduct and willful breach of trust and
confidence for which he may be dismissed.48

Labor II – 1
Bravo appealed the Decision of Executive Labor Arbiter Pelaez.49 In the Resolution50 dated January
31, 2007, the National Labor Relations Commission found that Bravo's dismissal from service was
illegal. There was no clear showing that Bravo violated any school policy.51 Moreover, Bravo received
the increased salary in good faith.52 The National Labor Relations Commission also found that Urios
College "failed to afford [Bravo] the opportunity to be heard and to defend himself with the
assistance of counsel."53 Urios College was ordered to pay Bravo separation pay instead of reinstating
him to his former position due to strained relations. Full backwages and attorney's fees were likewise
awarded.54

Urios College assailed National Labor Relations Commission's Resolution dated January 31, 2007
through a petition for certiorari before the Court of Appeals.55

In the Decision dated January 31, 2011, the Court of Appeals reversed the National Labor Relations
Commission's Resolution and reinstated the decision of Executive Labor Arbiter Pelaez.56

The Court of Appeals ruled that Urios College had substantial basis to dismiss Bravo from service on
the ground of serious misconduct and loss of trust and confidence.57 Bravo occupied a highly
sensitive position as the school's Comptroller. "[I]n the course of his duties, [he] granted himself
additional salaries" without proper authorization.58 Rank-and-file employees may only be dismissed
from service for loss of trust and confidence if the employer presents proof that the employee
participated in the alleged misconduct. However, for managerial employees, it is sufficient that the
employer has reasonable ground to believe that the employee is responsible for the alleged
misconduct.59

Bravo moved for reconsideration but his motion was denied in the Resolution60 dated July 14, 2011.

Bravo filed a Petition for Review61 before this Court on August 31, 2011 to which respondent filed a
Comment on January 6, 2012.62 In the Resolution dated January 30, 2013, this Court gave due
course to the Petition and required the parties to submit their respective memoranda.63

Petitioner asserts that he acted in good faith. He insists that key school officials, including the Human
Resources Department Head,64 classified the position of Comptroller as middle management.65 Thus,
he cannot be held accountable for the change in the rank of Comptroller from that of office head to
middle management.66

Petitioner argues that suggesting an upgrade in his rank and salary cannot be considered serious
misconduct.67 He claims that he did not transgress any established rule or policy as "he was duly
authorized . . . to receive the benefits of a middle[-]management employee."68 Petitioner further
argues that a dismissal based on loss of trust and confidence must rest on an actual breach of
duty.69 It may not be invoked by an employer without any factual basis.70

Petitioner adds that he was not given ample opportunity to be heard and defend
himself.71 Respondent refused to furnish petitioner the minutes of the investigation proceedings and
copies of official documents, all of which respondent had in its custody.72 Moreover, petitioner was
not given the opportunity to comment on the selection of the members of the investigating
committee.73

On the other hand, respondent asserts that there was substantial evidence to dismiss petitioner on
the ground of serious misconduct and loss of trust and confidence under the Labor Code.74 Petitioner
failed to follow regular protocol with respect to the computation of his and other employees'
salaries.75 Respondent emphasizes that petitioner occupies a highly sensitive position. Hence, his
integrity should be beyond reproach.76 Proof beyond reasonable doubt is not required in termination
cases based on loss of trust and confidence77 as long as there is reasonable ground to believe that
the employee committed an act of dishonesty.78

Labor II – 1
Respondent contends that petitioner's right to procedural due process was not violated.79 Petitioner
was present during the hearings and was even given copies of the documents presented against him.
Moreover, respondent required petitioner to submit his position paper after the investigation.80

The case presents the following issues for this Court's resolution:

First, whether petitioner's employment was terminated for a just cause;81

Second, whether petitioner was deprived of procedural due process;82 and

Finally, whether petitioner is entitled to the payment of separation pay, backwages, and attorney's
fees.83

Petitioner's dismissal from employment was valid.

Under Article 297 of the Labor Code, an employer may terminate the services of an employee for the
following just causes: chanRoblesvirtualLawlibrary

Article 297. [282] Termination by Employer. — An employer may terminate an employment for any
of the following causes: chanRoblesvirtualLawlibrary

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing.
To warrant termination of employment under Article 297(a) of the Labor Code, the misconduct must
be serious or "of such grave and aggravated character."84 Trivial and unimportant acts are not
contemplated under Article 297(a) of the Labor Code.85

In addition, the misconduct must "relate to the performance of the employee's duties" that
would render the employee "unfit to continue working for the employer."86 Gambling during
office hours,87 sexual intercourse within company premises,88 sexual harassment,89 sleeping while on
duty,90 and contracting work in competition with the business of one's employer91 are among those
considered as serious misconduct for which an employee's services may be terminated.

Recently, this Court has emphasized that the rank-and-file employee's act must have been
"performed with wrongful intent" to warrant dismissal based on serious misconduct.92 Dismissal is
deemed too harsh a penalty to be imposed on employees who are not induced by any perverse or
wrongful motive despite having committed some form of misconduct.

Hence, in Moreno v. San Sebastian College-Recoletos,93 this Court deemed the penalty of dismissal as
disproportionate to the committed offense94 because the employee was neither induced by nor
motivated by a perverse or wrongful intent in violating the school's policy on external teaching
engagements.95

The same line of reasoning was applied in Universal Robina Sugar Milling Corp. v. Albay96 wherein

Labor II – 1
union members assisted the implementation of a writ of execution issued in their favor without
proper authority. This Court found that the union members did not act "with intent to gain or with
wrongful intent." Instead, they were impelled by their desire to collect the balance of their unpaid
benefits, which the Department of Labor and Employment awarded to them.97

Thus, to warrant the dismissal from service of a rank-and-file employee under Article
297(a) of the Labor Code, the misconduct (1) must be serious, (2) should "relate to the
performance of the employee's duties," (3) should render the employee "unfit to continue
working for the employer," and (4) should "have been performed with wrongful intent." 98

There is no evidence that the position of Comptroller was officially reclassified as middle
management by respondent. Petitioner's employment ranking slip, if at all, only constituted proof of
petitioner's evaluation score. It hardly represented the formal act of respondent in reclassifying the
position of Comptroller. Hence, petitioner could not summarily assign to himself a higher salary rate
without rendering himself unfit to continue working for respondent.

However, it appears that petitioner was neither induced nor motivated by any wrongful
intent. He believed in good faith that respondent had accepted and approved his
recommendations on the proposed ranking scale for school year 2001-2002.

Nevertheless, due to the nature of his occupation, petitioner's employment may be

terminated for willful breach of trust under Article 297(c), not Article 297(a), of the Labor Code.

A dismissal based on willful breach of trust or loss of trust and confidence under Article 297 of the
Labor Code entails the concurrence of two (2) conditions.

First, the employee whose services are to be terminated must occupy a position of trust and
confidence.99

There are two (2) types of positions in which trust and confidence are reposed by the employer,
namely, managerial employees and fiduciary rank-and-file employees.100 Managerial employees are
considered to occupy positions of trust and confidence because they are "entrusted with confidential
and delicate matters."101 On the other hand, fiduciary rank-and-file employees refer to those
employees, who, "in the normal and routine exercise of their functions, regularly handle significant
amounts of [the employer's] money or property."102 Examples of fiduciary rank-and-file employees
are "cashiers, auditors, property custodians,"103 selling tellers,104 and sales managers.105 It must be
emphasized, however, that the nature and scope of work and not the job title or designation
determine whether an employee holds a position of trust and confidence.106

The second condition that must be satisfied is the presence of some basis for the loss of trust and
confidence. This means that "the employer must establish the existence of an act justifying the loss
of trust and confidence."107 Otherwise, employees will be left at the mercy of their employers.108

Different rules apply in determining whether loss of trust and confidence may validly be used as a
justification in termination cases. Managerial employees are treated differently than fiduciary rank-
and-file employees.109 In Caoile v. National Labor Relations Commission:110

[W]ith 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, 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
Labor II – 1
nature of his participation therein renders him unworthy of the trust and confidence demanded by his
position.111 (Citations omitted)

Although a less stringent degree of proof is required in termination cases involving managerial
employees, employers may not invoke the ground of loss of trust and confidence arbitrarily.112 The
prerogative of employers in dismissing a managerial employee "must be exercised without abuse of
discretion."113

Set against these parameters, this Court holds that petitioner was validly dismissed based on loss of
trust and confidence. Petitioner was not an ordinary rank-and-file employee. His position of
responsibility on delicate financial matters entailed a substantial amount of trust from respondent.
The entire payroll account depended on the accuracy of the classifications made by the Comptroller.
It was reasonable for the employer to trust that he had basis for his computations especially with
respect to his own compensation. The preparation of the payroll is a sensitive matter requiring
attention to detail. Not only does the payroll involve the company's finances, it also affects the
welfare of all other employees who rely on their monthly salaries.

Petitioner's act in assigning to himself a higher salary rate without proper authorization is a clear
breach of the trust and confidence reposed in him. In addition, there was no reason for the
Comptroller's Office to undertake the preparation of its own summary table because this was a
function that exclusively pertained to the Human Resources Department. Petitioner offered no
explanation about the Comptroller's Office's deviation from company procedure and the discrepancies
in the computation of other employees' salaries.114 Petitioner's position made him accountable in
ensuring that the Comptroller's Office observed the company's established procedures. It was
reasonable that he should be held liable by respondent on the basis of command responsibility.115

II

In termination based on just causes, the employer must comply with procedural due process by
furnishing the employee a written notice containing the specific grounds or causes for
dismissal.116 The notice must also direct the employee to submit his or her written explanation within
a reasonable period from the receipt of the notice.117 Afterwards, the employer must give the
employee ample opportunity to be heard and defend himself or herself. A hearing, however, is not a
condition sine qua non.118 A formal hearing only becomes mandatory in termination cases when so
required under company rules or when the employee requests for it.119

Previously, a formal hearing was considered as an indispensable component of procedural due

process in dismissal cases.120 However, in Perez v. Philippine Telegraph and Telephone Co., this Court
clarified:121
The test for the fair procedure guaranteed under Article 277 (b) [now, Article 292(b)] cannot be
whether there has been a formal pretermination confrontation between the employer and the
employee. The "ample opportunity to be heard" standard is neither synonymous nor similar to a
formal hearing. To confine the employee's right to be heard to a solitary form narrows down that
right. It deprives him of other equally effective forms of adducing evidence in his defense. Certainly,
such an exclusivist and absolutist interpretation is overly restrictive. The "very nature of due process
negates any concept of inflexible procedures universally applicable to every imaginable situation."

....

Significantly, Section 2 (d), Rule I of the Implementing Rules of Book VI of the Labor Code itself
provides that the so-called standards of due process outlined therein shall be observed
"substantially", not strictly. This is a recognition that while a formal hearing or conference is ideal, it
is not an absolute, mandatory or exclusive avenue of due process.

An employee's right to be heard in termination cases under Article 277 (b) as implemented by
Labor II – 1
Section 2 (d), Rule I of the Implementing Rules of Book VI of the Labor Code should be interpreted in
broad strokes. It is satisfied not only by a formal face to face confrontation but by any meaningful
opportunity to controvert the charges against him and to submit evidence in support thereof.

. . . "To be heard" does not mean verbal argumentation alone inasmuch as one may be heard just as
effectively through written explanations, submissions or pleadings. Therefore, while the phrase
"ample opportunity to be heard" may in fact include an actual hearing, it is not limited to a formal
hearing only. In other words, the existence of an actual, formal "trial-type" hearing, although
preferred, is not absolutely necessary to satisfy the employee's right to be heard.122 (Emphasis in the
original, citations omitted)
Any meaningful opportunity for the employee to present evidence and address the charges against
him or her satisfies the requirement of ample opportunity to be heard.123

Finally, the employer must serve a notice informing the employee of his or her dismissal from
employment.

In this case, respondent complied with all the requirements of procedural due process in terminating
petitioner's employment. Respondent furnished petitioner a show cause memo stating the specific
grounds for dismissal. The show cause memo also required petitioner to answer the charges by
submitting a written explanation.124 Respondent even informed petitioner that he may avail the
services of counsel. Respondent then conducted a thorough investigation. Three (3) hearings were
conducted on separate occasions.125 The findings of the investigation committee were then sent to
petitioner.126 Lastly, petitioner was given a notice of termination containing respondent's final
decision.127

Ordinarily, employees play no part in selecting the members of the investigating committee. That
petitioner was not given the chance to comment on the selection of the members of the investigating
committee does not mean that he was deprived of due process. In addition, there is no evidence
indicating that the investigating committee was biased against petitioner. Hence, there is no merit in
petitioner's claim that he was deprived of due process.

Under Article 294 of the Labor Code,128 the reliefs of an illegally dismissed employee are
reinstatement and full backwages. "Backwages is a form of relief that restores the income that was
lost by reason of [the employee's] dismissal" from employment.129 It is "computed from the time that
[the employee's] compensation was withheld . . . [until] his [or her] actual
reinstatement."130 However, when reinstatement is no longer feasible, separation pay is awarded.131

Considering that there was a just cause for terminating petitioner from employment, there is no basis
to award him separation pay and backwages. There are also no factual and legal bases to award
attorney's fees to petitioner.

WHEREFORE, the Petition for Review is DENIED. The Court of Appeals' Decision dated January 31,
2011 in CA-G.R. SP No. 02407-MIN is AFFIRMED.

Labor II – 1
 25.) [G.R. NO. 173231 : December 28, 2007]

RUBEN L. ANDRADA, BERNALDO V. DELOS SANTOS, JOVEN M. PABUSTAN, FILAMER

ALFONSO, VICENTE A. MANTALA, JR., HARVEY D. CAYETANO, and JOVENCIO L.
POBLETE, Petitioners, v. NATIONAL LABOR RELATIONS VELASCO, JR., COMMISSION, SUBIC
LEGEND RESORTS AND CASINO, INC., and/or MR. HWA PUAY, MS. FLORDELIZA MARIA
REYES RAYEL, and its CORPORATE OFFICERS, Respondents.

DECISION

VELASCO, JR., J.:

To provide full protection to labor, the employers' prerogative to bring down labor costs through
retrenchment must be exercised carefully and essentially as a measure of last resort. So should
managements' prerogative to declare the employees' services redundant not be used a weapon to
frustrate labor. This case brings to fore the continuing labor-management struggle for mutual
survival.

Petitioners Ruben Andrada, Jovencio Poblete, Filamer Alfonso, Harvey Cayetano, Vicente Mantala, Jr.,
Bernaldo delos Santos, and Joven Pabustan were hired on various dates from 1995 up to 1997 and
worked as architects, draftsmen, operators, engineers, and surveyors in the Subic Legend Resorts
and Casino, Inc. (Legend) Project Development Division on various projects. Hwa Puay, Flordeliza
Maria Reyes Rayel, and other corporate officers are impleaded in this case in their official capacities
as officers of Legend.

On January 6, 1998, Legend sent notice to the Department of Labor and Employment of its intention
to retrench and terminate the employment of thirty-four (34) of its employees, which include
petitioners, in the Project Development Division. Legend explained that it would be retrenching its
employees on a last-in-first-out basis on the strength of the updated status report of its Project
Development Division, as follows: (1) shelving of the condotel project until economic conditions in
the Philippines improve; (2) completion of the temporary casino in Cubi by mid-February 1998; (3)
subcontracting the super structure work of Grand Legend to a third party; (4) completion of most of
the rectification work at the Legenda Hotel; (5) completion of the temporary casino in Cubi; and (6)
abolition of the Personnel and Administrative Department of the Project Development Division and
transfer of its function back to Legend's Human Resources Department.

The following day, on January 7, 1998, Legend sent the 34 employees their respective notices of
retrenchment, stating the same reasons for their retrenchment. It also offered the employees the
following options, to wit:

1. Temporary retrenchment/lay-off for a period not to exceed six months within which we shall
explore your possible reassignment to other departments or affiliates, after six months and
redeployment and/or matching are unsuccessful, permanent retrenchment takes place and
separation pay is released.

2. Permanent retrenchment and payment of separation pay and other benefits after the thirty (30)
days notice has lapsed; or

3. Immediate retrenchment and payment of separation pay, benefits and one month's salary in lieu
of notice to allow you to look for other employment opportunities.1

Legend gave said employees a period of one week or until January 14, 1998 to choose their option,
with option number 2 (permanent retrenchment) as the default choice in case they failed to express
Labor II – 1
their preferences. After the employees made their choices, they also expressed their reservation that
their choice should not be deemed as waiver of their rights granted under the Labor Code or their
right to question the validity of their retrenchment should their separation benefits not be settled by
January 30, 1998.

Curiously, on the same day, the Labor and Employment Center of the Subic Bay Metropolitan
Authority advertised that Legend International Resorts, Inc. was in need of employees for positions
similar to those vacated by petitioners.2

Afterwards, on February 6, 1998, Legend informed the retrenched employees of their permanent
retrenchment and/or their options. Legend paid the retrenched employees their salaries up to
February 6, 1998, separation pay, pro-rated 13th-month pay, ex-gratia, meal allowance, unused
vacation leave credits, and tax refund. Petitioners, in turn, signed quitclaims but reserved their right
to sue Legend.

Subsequently, on March 3, 1998, 143 of the 34 retrenched employees filed before the Regional
Arbitration Branch of the National Labor Relations Commission (NLRC) in San Fernando City,
Pampanga, a complaint for illegal dismissal and money claims for the payment of their share in the
service charges, unused leaves, and their salaries for the unexpired portion of their respective
employment contracts, damages, and attorney's fees against Legend and its officials, Hwa Puay and
Flordeliza Maria Reyes Rayel. The complaint was docketed as NLRC RAB III-03-9080-98.

Before the Labor Arbiter, complainants alleged that they were illegally dismissed because Legend,
after giving retrenchment as the reason for their termination, created new positions similar to those
they had just vacated. Legend, on the other hand, invoked management prerogative when it
terminated the retrenched employees; and said that complainants voluntarily signed quitclaims so
that they were already barred from suing Legend.

On February 7, 2000, the Labor Arbiter rendered a Decision, the fallo of which reads:

WHEREFORE, premises considered, respondents are hereby adjudged guilty of Illegal dismissal, and
they are ordered to immediately reinstate the complainants without loss of seniority rights and to pay
to them the following:

1. Ruben Andrada:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P14,300.00
and the same amount every month thereafter until reinstated - - - - - - - - - P343,200.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - -P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P28,600.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P28,600.00

e) Damages - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P100,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P519,600.00

2. Darryl Bautista:

Labor II – 1
a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P11,200.00
and the same amount every month thereafter until reinstated - - - - - - - - - P268,800.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P22,400.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P22,400.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P332,800.00

3. Jovencio Poblete

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P12,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P288,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P24,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P24,000.00

e) Damages - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P100,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P455,200.00

4) Renato Pangilinan:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P17,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P408,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P34,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P34,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P495,200.00

5) Dario Rapada:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P10,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P240,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P20,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P20,000.00

Labor II – 1
T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P299,200.00

6) Adrian Camacho:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P7,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P168,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P14,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P14,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P215,200.00

7) Marvin Samaniego:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P7,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P168,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P14,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P14,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P215,200.00

8) Filamer Alfonso:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P10,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P240,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P20,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P20,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P299,200.00

9) Milton Maravilla:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P13,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P312,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P26,000.00

Labor II – 1
d) 14th month pay for 2 years (1998 to 1999) - - - - - - P26,000.00

e) Damages - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P100,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P483,200.00

10) Harvey Cayetano:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P8,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P192,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P16,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P16,000.00

e) Damages - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P100,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P343,200.00

11) Vicente Mantala, Jr.:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P5,500.00
and the same amount every month thereafter until reinstated - - - - - - - - - P132,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P11,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P11,000.00

e) Damages - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P100,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P273,200.00

12) Carlos Mananquil:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P30,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P720,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P60,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P60,000.00

e) Damages - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P100,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P959,200.00
Labor II – 1
13) Bernaldo delos Santos:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P18,500.00
and the same amount every month thereafter until reinstated - - - - - - - - - P444,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P37,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P37,000.00

e) Damages - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P100,000.00

f) Service charge at P1,500.00 a month from May 15, 1996 to February 6, 2000 (44 months) and
every month thereafter until reinstated - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- P72,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P709,200.00

14) Joven Pabustan:

a) Back salaries from February 6, 1998 to February 6, 2000 (24 months) in the sum of P10,000.00
and the same amount every month thereafter until reinstated - - - - - - - - - P240,000.00

b) Meal allowance at P800.00 a month from February 6, 1998 to February 6, 2000 (24 months) and
the same amount every month thereafter until reinstated - - - - - - - - - - P19,200.00

c) 13th month pay for 2 years (1998 to 1999) - - - - - - P20,000.00

d) 14th month pay for 2 years (1998 to 1999) - - - - - - P20,000.00

e) Damages - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P100,000.00

T O T A L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - P399,200.00

The respondents are further ordered to pay to the complainants attorney's fees equivalent to ten
(10%) percent of the total award due the complainants. The payment of back salary, 13th month pay
and 14th month pay, meal allowance and service charge shall be computed up to the date of the
finality of this decision.

SO ORDERED.4

The Labor Arbiter stated that the documents submitted by Legend to justify the retrenchment of its
personnel were insufficient because the documents failed to show that Legend was suffering from
actual losses or that there was redundancy in the positions occupied by petitioners. The Labor Arbiter
also attributed bad faith on the part of Legend when it advertised openings for positions similar to
those occupied by the retrenched employees at the same time the retrenchment program was being
implemented.

The Labor Arbiter gave no evidentiary weight to complainants' quitclaims because, according to the
Labor Arbiter, these quitclaims were part of the clearance forms prepared and imposed by Legend on
the retrenched employees before their clearances could be approved. The Labor Arbiter also found

Labor II – 1
that in the conference held on January 28, 1998 between complainants and Legend's management,
complainants inscribed their reservations at the bottom of their clearance forms, stating that they
would accept Legend's offer on the condition that they reserved the option to later file their
respective claims with the NLRC.

With regard to the issue of damages, the Labor Arbiter observed that complainants, who were
licensed professionals, had sufficiently proven that they suffered social humiliation and mental
trauma because their dismissal was clearly attended by bad faith and contrary to laws and public
policy. On account of Legend's bad faith, the Labor Arbiter awarded attorney's fees equivalent to ten
percent (10%) of the total amount awarded to complainants.

On April 7, 2000, Legend filed an appeal with the NLRC. Notably, its new counsel did not submit his
formal substitution as counsel. Complainants consequently filed their Memorandum on Appeal with a
prayer to declare the Labor Arbiter's decision final. They aver that since there was no formal
substitution of counsel, Legend's new counsel had no personality to file an appeal; and because no
appeal was perfected within the reglementary period, the Labor Arbiter's decision should be deemed
final and executory.

After three years, the NLRC rendered its June 23, 2003 Decision which reversed the Labor Arbiter.
The NLRC held that the Labor Arbiter erred when he failed to consider the numerous documents
presented and submitted by Legend to prove that it was suffering from actual losses, and that there
was redundancy in the work of the retrenched employees. The NLRC also gave credence to Legend's
claim that it was Yap Yuen Khong, and not Legend, who asked for Subic Bay Metropolitan Authority's
help in recruiting personnel for Gaehin International Inc. (Gaehin) as the sub-contractor for the
construction of the Grand Legenda Hotel and Casino. The NLRC observed that Gaehin was an entity
distinct and separate from Legend.

With regard to the Labor Arbiter's award of payment of service charges to Bernaldo delos Santos and
Carlos Mananquil, the NLRC held that the award was improper since delos Santos and Mananquil's
employment contracts did not provide for the payment of service charges. According to the NLRC,
though they previously received this benefit, it was because of an error in the administrative system;
and since the benefits were paid by mistake, these did not ripen into a company practice.

The NLRC likewise held that the Labor Arbiter erred when it awarded the retrenched employees 14th
month pay, or ex-gratia payment. The NLRC explained that this was a one-time bonus for the year
1997 given for the employees' hard work and contribution for the year 1997. Further, no evidence
suggested that this was done in the past or subsequent years.

The NLRC also held that Legend fully and properly complied with the 30-day notice requirements to
the DOLE and to the retrenched employees.

The NLRC Decision's fallo reads:

WHEREFORE, premises considered, the assailed decision is hereby reversed and set aside.
Respondents are adjudged not guilty of illegal dismissal. The order of reinstatement as well as all
monetary awards are deleted from the decision.

SO ORDERED.5

Complainants moved for the reconsideration of the NLRC's Decision, but their motion was denied by
the NLRC. Consequently, 106 out of the 147 original complainants filed a Petition for Certiorari with
the Court of Appeals (CA), docketed as CA-G.R. SP No. 81701. This petition was, however, denied by
the CA for lack of merit in its April 28, 2006 Decision.8

Labor II – 1
The CA held that the retrenched employees were validly dismissed from employment due to
redundancy and not retrenchment. The CA ratiocinated that Legend had validly terminated the
employment of its employees since it had proven that complainants' positions were superfluous and
that there was an oversupply of employees; more than what its projects needed.

On the issue of Legend's recruitment of new personnel after terminating complainants' employment,
the CA held that the NLRC had sufficiently explained that it was not Legend but Gaehin, through Mr.
Khong, which was recruiting for personnel.

Aggrieved by the CA Decision, seven9 out of the 14 original complainants filed the present petition.
They raise the following issues:

1. Did Legend perfect its appeal before the NLRC, though it had not formally and properly substituted
its counsel? cralaw library

2. Were complainants illegally dismissed? Corrollarily, was there a valid retrenchment? Or,
did Legend prove the existence of redundancy in its Project Development Division?

Petitioners argue that the Labor Arbiter's decision should be deemed final and executory since
Legend failed to formally substitute its counsel, and, thus, failed to perfect its appeal.

Legend, on the other hand, relies heavily on the CA's ruling, which held that lack of proper
substitution is not a sufficient ground to arrive at a finding of grave abuse of discretion. Even without
substitution, private respondent's new lawyer could still be considered a collaborating counsel. A
party may have two or more lawyers working in collaboration in a given litigation.

We rule for Legend.

The CA correctly held in this case that Legend perfected its appeal, albeit, through a new counsel. It
has long been settled that the NLRC is not bound by the strict technical rules of procedure of the
Rules of Court. The CA had correctly held that as a general rule, our policy towards invocation of the
right to appeal has been one of liberality, since it is an essential part of the judicial system. In line
with this principle, courts have been advised to proceed with caution so as not to deprive a party of
the right to appeal. Every party litigant should be given the amplest opportunity for the proper and
just disposition of his/her cause freed from the constraints of technicalities. Thus, the NLRC did not
commit grave abuse of discretion when it decided the case on the merits instead of dismissing the
appeal on a mere technicality.

With regard to the issue of the legality of the dismissals, petitioners argue that Legend failed to prove
the legal and factual existence of the cause for dismissal, and that it failed to comply with the
requirements for the implementation of retrenchment. Petitioners further argue that the CA abused
its discretion in ruling that the employees were validly dismissed not because of retrenchment but for
redundancy. Legend, in contrast, relies on its management prerogative to justify the termination of
petitioners' employment. Legend also relies on the CA's ruling that Legend sufficiently proved the
existence of redundancy that justified petitioners' dismissal from service.

On this issue, we rule for petitioners.

A company's exercise of its management prerogatives is not absolute. It cannot exercise its
prerogative in a cruel, repressive, or despotic manner. We held in F.F. Marine Corp. v. NLRC:

This 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
Labor II – 1
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 irregular termination of employment.
Imagined or undocumented business losses present the least propitious scenario to justify
retrenchment.10

Under the Labor Code, retrenchment and redundancy are authorized causes for separation from
service. However, to protect labor, dismissals due to retrenchment or redundancy are subject to
strict requirements under Article 283 of the Labor Code, to wit:

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

Retrenchment is an exercise of management's prerogative to terminate the employment of

its employees 'en masse, to either minimize or prevent losses, or when the company is
about to close or cease operations for causes not due to business losses.

In Lopez Sugar Corporation v. Federation of Free Workers,11 this Court had the opportunity to lay
down the following standards that a company must meet to justify retrenchment to prevent abuse by
employers:

Firstly, the losses expected should be substantial and not merely de minimis in extent. If
the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and
inconsequential in character, the bona fide nature of 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 other 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.

Labor II – 1
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.

In Ariola v. Philex Mining Corporation,12 the Court summarized the requirements for retrenchment, as
follows:

Thus, 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 - 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
x x x 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 render[s] the retrenchment illegal.

In the present case, Legend glaringly failed to show its financial condition prior to and at the time it
enforced its retrenchment program. It failed to submit audited financial statements regarding its
alleged financial losses. Though Legend complied with the notice requirements and the payment of
separation benefits to the retrenched employees, its failure to establish the basis for the
retrenchment of its employees constrains us to declare the retrenchment illegal.

However, the CA in its decision ruled that the petitioners were validly dismissed not for retrenchment
but for redundancy. The CA explained that Legend mistakenly used the term retrenchment when all
its reasons and justifications for the dismissal of its employees point to redundancy.

Were petitioners' positions redundant? Had Legend sufficiently established the fact of redundancy? cralaw library

Petitioners claim that the CA erred in concluding that Legend substantially established redundancy as
the authorized cause underlying their dismissal from service. They aver that retrenchment and
redundancy are not interchangeable, and both were not proven by Legend to justify their dismissal.

Legend, on the other hand, claims that petitioners never refuted the causes for termination contained
in the notice of retrenchment. It further explains that it really had intended redundancy as the basis
for the termination of the employees, as seen in its arguments before the Labor Arbiter, NLRC, and
CA, where it claimed that before the retrenched employees were actually dismissed, the retrenched
employees were not doing any work; that the work of the Project Development Division had already
been completed and accomplished; and that the Engineering Services Division and the Project
Development Division performed overlapping functions. Legend points out that it had really intended
redundancy as the basis for the termination of the employees, that is why it had paid one month's
pay instead of one-half month's pay for every year of service.

We rule that Legend failed to establish redundancy.

Retrenchment and redundancy are two different concepts; they are not synonymous and therefore
should not be used interchangeably. This Court explained in detail the difference between the two
concepts in Sebuguero v. NLRC:13

Labor II – 1
Redundancy exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of
factors, such as over hiring of workers, decreased volume of business, or dropping of a
particular product line or service activity previously manufactured or undertaken by the
enterprise.

Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the
termination of employment initiated by the employer through no fault of the employee's
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. Simply
put, it is an act of the employer of dismissing employees because of losses in the operation
of a business, lack of work, and considerable reduction on the volume of his business, a
right consistently recognized and affirmed by this Court.

Thus, simply put, redundancy exists when the number of employees is in excess of what is
reasonably necessary to operate the business. The declaration of redundant positions is a
management prerogative. The determination that the employee's services are no longer necessary or
sustainable and therefore properly terminable is an exercise of business judgment by the employer.
The wisdom or soundness of this judgment is not subject to the discretionary review of the Labor
Arbiter and NLRC.14

It is however not enough for a company to merely declare that positions have become redundant. It
must produce adequate proof of such redundancy to justify the dismissal of the affected
employees.15 In Panlilio v. NLRC,16 we said that the following evidence may be proffered to
substantiate redundancy: "the new staffing pattern, feasibility studies/proposal, on the
viability of the newly created positions, job description and the approval by the
management of the restructuring." In another case, it was held that the company sufficiently
established the fact of redundancy through "affidavits executed by the officers of the respondent
PLDT, explaining the reasons and necessities for the implementation of the redundancy program."17

According to the CA, Legend proved the existence of redundancy when it submitted a status review
of its project division where it reported that the 78-man personnel exceeded the needs of the
company. The report further stated that there was duplication of functions and positions, or an over
supply of employees, especially among architects, engineers, draftsmen, and interior designers.

We cannot agree with the conclusion of the CA.

The pieces of evidence submitted by Legend are mere allegations and conclusions not supported by
other evidence.ςηαñrοblεš  Î½Î¹r† Ï…αl  lαω  lιbrαrà ¿

Legend did not even bother to illustrate or explain in detail how and why it considered petitioners'
positions superfluous or unnecessary. The CA puts too much weight on petitioners' failure to refute
Legend's allegations contained in the document it submitted. However, it must be remembered that
the employer bears the burden of proving the cause or causes for termination. Its failure to do so
would necessarily lead to a judgment of illegal dismissal.

Again, it bears stressing that substantial evidence is the question of evidence required to establish a
fact in cases before administrative and quasi-judicial bodies. Substantial evidence, as amply
explained in numerous cases, is that amount of "relevant evidence which a reasonable mind might
accept as adequate to support a conclusion."18

Labor II – 1
Thus, in the same way, we held that the basis for retrenchment was not established by substantial
evidence, we also rule that Legend failed to establish by the same quantum of proof the fact of
redundancy; hence, petitioners' termination from employment was illegal.

WHEREFORE, the petition is GRANTED. The April 28, 2006 Decision of the CA in CA-G.R. SP No.
81701 and the June 23, 2003 Decision of the NLRC in NLRC NCR CA No. 024306-2000 are hereby
REVERSED and SET ASIDE. The February 7, 2000 Decision of Labor Arbiter Elias H. Salinas in NLRC
RAB III-03-9080-98 is hereby REINSTATED with the MODIFICATION that the award for 14th-month
pay or ex-gratia payment to all complainants in NLRC RAB III-03-9080-98 and the award for service
charges to Bernaldo delos Santos and Carlos Mananquil are hereby DELETED.

Labor II – 1
 26.) [G.R. NO. 172363 : March 7, 2008]

JUVY M. MANATAD, Petitioner, v. PHILIPPINE TELEGRAPH AND TELEPHONE

CORPORATION, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari[1]under Rule 45 of the Revised Rules of Court
filed by petitioner Juvy M. Manatad seeking the reversal and the setting aside of the Decision2 dated
12 July 2005 and the Resolution3 dated 22 March 2006 of the Court of Appeals in CA-G.R. SP No.
79440. The appellate court, in its assailed Decision and Resolution, reversed the Decisions4 of the
National Labor Relations Commission (NLRC) and the Labor Arbiter declaring the dismissal of
Manatad from employment illegal. The dispositive portion of the Court of Appeals Decision reads:

WHEREFORE, the petition is GRANTED. The Decision dated 18 September 2001 and Resolution dated
22 July 2003 of [NLRC] as well as the Decision dated 14 July 1999 of the Labor Arbiter are
REVERSED and SET ASIDE. However, [herein respondent] is hereby ordered to pay [herein
petitioner] Php43,5000.00 as separation pay. No costs.5

The present controversy stems from the following antecedent factual and procedural facts:

In September 1988, petitioner was employed by respondent Philippine Telegraph and Telephone
Corporation (PT&T) as junior clerk with a monthly salary of P3,839.74. She was later promoted as
Account Executive, the position she held until she was temporarily laid off from employment on 1
September 1998.

Petitioner's temporary separation from employment was pursuant to the Temporary Staff Reduction
Program adopted by respondent due to serious business reverses. On 16 November 1998, petitioner
received a letter from respondent inviting her to avail herself of its Staff Reduction Program Package
equivalent to one-month salary for every year of service, one and one-half month salary, pro-rated
13th month pay, conversion to cash of unused vacation and sick leave credits, and Health
Maintenance Organization and group life insurance coverage until full payment of the separation
package. Petitioner, however, did not opt to avail herself of the said package. On 26 February 1999,
petitioner received a Notice of Retrenchment from respondent permanently dismissing her from
employment effective 16 February 1999.

Consequently, petitioner filed a Complaint for illegal dismissal against respondent, its Regional
Director for Visayas Reynaldo Macrohon, and its President and Chief Executive Officer Marilyn Eleonor
Santiago before the Labor Arbiter claiming the award of separation pay, damages and attorney's
fees. In her Position Paper, petitioner mainly alleged that the retrenchment program adopted by
respondent was illegal for it was gaining profits for the period of July 1997 to June 1998. In support
of her allegation that respondent was obtaining profits, petitioner presented the central Visayas
Operating Margin Reports6 showing the respondent's gross revenue and net profits in the region for
the period in question:

Month Gross Revenue Net Profit

July 1997 P2,496,981.31 P775,742.82
August 1997 2,314,527.75 662,812.13
September 1997 2,308,364.14 604,924.51
October 1997 2,403,083.30 649,583.33
Labor II – 1
November 1997 1,965,446.44 367,956.48
December 1997 2,391,721.94 657,023.23
January 1998 2,649,857.35 825,581.17
February 1998 2,611,029.13 702,132.23
March 1998 2,340,166.83 488,549.78
April 1998 2,199,814.78 230,380.21
May 1998 2,186,735.40 403,416.66
June 1998 2,240,238.94 500,656.64

Petitioner further belied respondent's contention that it was suffering from serious financial reverses
by presenting respondent's Special Order No. 98-217 granting an increase in the salaries of its
employees under Job Grade 8 and 9 in the amount of P2,300.00 a month effective January 1998.
Petitioner's evidence supposedly showed that it was still economically viable for respondent to
continue its business operations without downsizing its workforce. Petitioner thus prayed for the
award of separation pay in the amount of P107,000.00, unpaid salary, prorated 13th month pay,
unpaid vacation leave benefits and attorney's fees.

On the other hand, respondent asserted that petitioner was separated from service pursuant to a
valid retrenchment implemented by the company. Retrenchment is an authorized cause for the
employer to terminate the services of an employee. Due to huge business losses suffered by
respondent in the sum of P684,096,285.00 from 1995-1998, it was constrained to arrest escalating
operating costs by downsizing its workforce.

Respondent claimed that it was suffering from serious financial reverses from 1995 up to 1999, as
shown below:

YEAR PROFIT LOSSES

1995   P29,868,406.00
1996   P52,112,986.00
1997 P1,491,532.00  
1998   P557,892,627.00
1999   P 770,552,970.008

To support its claim, respondent submitted its financial statements for the fiscal period of 30 June
1996 to 30 June 1998 audited by independent auditors. Independent public accountants, Sycip
Gorres Velayo (SGV) & Co., reported that respondent incurred a substantial loss of about P558 Million
which resulted in a deficit of about P574 Million as of 30 June 1998. Respondent has been negotiating
with its creditors for the suspension of payments until the completion of an acceptable restructuring
plan.9

On 14 January 1999, the Labor Arbiter rendered a Decision in favor of petitioner ruling that the
retrenchment program implemented by respondent was invalid. According to the Labor Arbiter,
respondent failed to prove that it was suffering from serious financial reverses warranting the
implementation of a retrenchment program. Mere comparative statements of income submitted by
respondent was not a conclusive proof of serious business losses, more so when their authenticity
was suspected for lack of signature of the one who prepared it. Consequently, petitioner's separation
from employment effected pursuant to an unjustified retrenchment program, was illegal. The
dispositive portion of the Labor Arbiter's Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Philippine
Telephone and Telegraph Corp. (PT&T) to pay the complainant Juvy Manatad the following:

Labor II – 1
1. Separation pay -- P107,000.00
2. Backwages -- P 42,800.00
3. Unpaid wages -- P 50,850.00
4. Vacation and sick leave pay -- P 13,563.00
5. Proportionate 13th month pay -- P 1,335.00
6. Attornet's fee -- P 21,554.00
TOTAL -- P 237,102.00
Less Advances -- P 13,050.00
    P 224,050.00

The other claims and the case against respondents Reynaldo Machoron and Marilyn Santiago are
dismissed for lack of merit.10

Dissatisfied, petitioner appealed to the NLRC arguing that the Labor Arbiter gravely abused its
discretion in sustaining the illegality of petitioner's dismissal. In ruling that respondent's
retrenchment program was unjustified, the Labor Arbiter disregarded the financial statements
submitted by the respondent which were audited by independent auditors showing that it was in dire
financial distress.

On 18 September 2001, the NLRC rendered a Decision11 affirming with modification the Labor Arbiter
Decision. The NLRC sustained the Labor Arbiter's findings with respect to respondent's failure to
substantiate its claim of financial reverses. It further noted that the Department of Labor and
Employment (DOLE) was not notified by the respondent of its retrenchment program as required by
law. The NLRC Decision thus decreed:

WHEREFORE, the Decision of the Labor Arbiter dated July 14, 1999 is affirmed with the modification
that respondents Reynaldo Macrohon and Marilyn Santiago are also ordered jointly and severally
liable with PT&T, for the payment of the judgment award.12

The Motion for Reconsideration filed by respondent was denied by the NLRC in its Resolution dated
22 June 2002.

On Certiorari, the Court of Appeals reversed the NLRC and the Labor Arbiter Decisions and upheld the
validity of respondent's retrenchment program.13 The appellate court was fully persuaded that the
respondent was besieged by a continuing downtrend in its business operations and severe financial
losses which justified its immediate drastic reduction of personnel.14 The financial standing of
respondent cannot be determined by the performance of a single branch or unit alone but by the
performance of all its branches integrated as a whole. In addition, the comparative statements of
income prepared by independent auditors constitute a normal method of proving the profit and loss
performance of a business company. Finally, the Court of Appeals also observed that respondent duly
complied with the requirement of service of notice to the employee one month before the intended
date of retrenchment.

Similarly ill-fated was petitioner's Motion for Reconsideration which was denied by the Court of
Appeals in a Resolution15 dated 22 March 2006.

Petitioner is now before this Court via  the Petition at bar raising the following issues:

I.

[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN DECLARING THAT PETITIONER WAS NOT
ILLEGALLY DISMISSED;

Labor II – 1
 II.

[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN FINDING THAT THE RETRENCHMENT MADE
BY PRIVATE RESPONDENT WAS VALID AND LEGAL WHEN PETITIONER DID NOT GIVE CONSENT;

III.

[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN NOT DECLARING THAT THE ALLEGED
LOSSES OF PRIVATE RESPONDENT WAS ALTERED TO CONFORM WITH THE EVIDENCE OF
PETITIONER SHOWING PROFITS IN THE CENTRAL VISAYAS OPERATIONS GROUP;

IV.

[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN FINDING THAT PETITIONER IS BOUND BY
THE COLLECTIVE BARGAINING AGREEMENT [CBA] WHEN SHE IS NOT A UNION MEMBER;

V.

[WHETHER OR NOT THE COURT OF APPEALS ERRED] IN DELETING THE AWARD OF SEPARATION
PAY, BACKWAGES, UNPAID WAGES, VACATION AND SICK LEAVE PAY, PROPORTIONATE 13th MONTH
PAY, AND ATTORNEY'S FEES.16

The present controversy hinges on the sole issue of whether or not the retrenchment
program implemented by respondent was valid.

The pertinent provision of the Labor Code reads:

Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate
the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the worker and the [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 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 as one (1) whole year.

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, 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 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.17 In the discharge of these requirements, it is the
employer who bears the onus, being in the nature of affirmative defense.18

For a valid retrenchment, the following requisites must be complied with: (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 month prior to the intended date of retrenchment; and (c) payment of

Labor II – 1
separation pay equivalent to one-month pay or at least one-half month pay for every year of service,
whichever is higher.19

Jurisprudential standards for the losses which may justify retrenchment have been reiterated by this
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.20

In the case at bar, respondent instituted a retrenchment program to arrest its alleged escalating
financial losses by downsizing its workforce. Respondent claimed that a significant portion of its
operational expenses went to manpower resources constraining it to implement measures to reduce
the number of employees so as to revive its fiscal condition.

In rejecting respondent's claim of economic reverses, the Labor Arbiter cast doubt on the authenticity
of the financial statements submitted by respondent, since these were not signed by the person who
prepared them. The Labor Arbiter likewise ruled that even if the financial statements were valid, they
still did not meet the quantum of proof needed in order to establish losses. These findings were
affirmed by the NLRC.

Banking on the Labor Arbiter and NLRC Decisions, petitioner now insists that respondent failed to
prove that it was suffering from substantial loss that would justify the retrenchment. She asserts that
respondent was in sound fiscal condition when it embarked on the reduction of its personnel, thus,
making the retrenchment program invalid.

We do not agree.

The theories espoused by the opposing parties must be weighed together with the evidence adduced
and in consonance with the evidentiary principles decreed by law and jurisprudence. We cannot favor
the bare assertions and empty figures submitted by the petitioner over the financial statements
audited by independent auditors presented by respondent without transgressing the basic rule in
assessing business losses, entrenched in jurisprudence.

Labor II – 1
Upon examination of the evidence adduced by both parties, we are convinced that, indeed,
respondent experienced serious financial crises as shown in the financial statements audited by
independent auditors, SGV & Co. and Alba Ledesma & Co. It is unlikely therefore that respondent
was just feigning business losses in order to ease out employees. To quote the conclusion by SGV &
Co. in its Report of Independent Public Accountants:

The accompanying financial statements have been prepared assuming that the Company will
continue as a going concern. The Company has incurred a substantial loss of about P558
million for the year ended June 30, 1998, which resulted to a deficit of about P574 million
as of June 30, 1998. As discussed in Note 1, the company has negotiated with its creditors for the
suspension of payments affecting its outstanding balances as of June 30, 1998 until the completion of
an acceptable restructuring plan. The suspension of payments covers a period of sixty (60) days from
the signing of the Memorandum of Agreement dated August 26, 1998. The Company's ability to
continue as a going concern depends, among others, on the completion of an acceptable
restructuring plan. The financial statements do not include any adjustments that might result from
the outcome of these uncertainties.21 (Emphasis supplied.)

The financial statements reflect that respondent suffered substantial loss in the amount of P558
Million by 30 June 1998. The Report of SGV & Co. substantiates the alleged precarious financial
condition of the respondent. The financial statements audited by independent external auditors
constitute the normal method of proving the profit and loss performance of a company as enunciated
in San Miguel Corporation v. Abella22 :

Normally, the condition of business losses is shown by audited financial documents like yearly
balance sheets, profit and loss statements and annual income tax returns. The financial statements
must be prepared and signed by independent auditors failing which they can be assailed as self-
serving documents.

No evidence can best attest to a company's economic status other than its financial statement. We
defined the evidentiary weight accorded to audited financial statements in Asian Alcohol Corporation
v. National Labor Relations Commission23 :

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. It is our ruling that
financial statements must be prepared and signed by independent auditors. Unless duly audited, they
can be assailed as self-serving documents. But it is not enough that only the financial statements for
the year during which retrenchment was undertaken, are presented in evidence. For it may happen
that while the company has indeed been losing, its losses may be on a downward trend, indicating
that business is picking up and retrenchment, being a drastic move, should no longer be resorted to.
Thus, the failure of the employer to show its income or loss for the immediately preceding year or to
prove that it expected no abatement of such losses in the coming years, may bespeak the weakness
of its cause. It is necessary that the employer also show that its losses increased through a period of
time and that the condition of the company is not likely to improve in the near future.

Being guided accordingly, we find that respondent was fully justified in implementing a
retrenchment program since it was undergoing business reverses, not only for a single
fiscal year, but for several years prior to and even after the program. In a span of six
years, respondent realized profits only in one year, in 1997. We thus quote with approval the
disquisition of the Court of Appeals:

As shown in the financial statements, during the years ended June 1995, 1996, 1998, 1999 and
2000, [herein respondent] incurred net losses of P40 million, P85 million, P555 million, P558
million, P700 million and P1.196 billion, respectively, resulting in a deficit of P2.169 billion as of June
30, 2000. We note, however, that [herein respondent] earned income in 1997 in the amount of P1.4

Labor II – 1
million. But it is clear that petitioner suffered a major setback when after earning P1.4 Million (as of
June 1997), [respondent] posted an astronomical financial loss of P555 million in the succeeding year
(as of June 1998).24

Even if we take into consideration the figures submitted by petitioner and accede to her position that
respondent was gaining substantial profits from its Central Visayas office, the said numbers,
nonetheless, do not bespeak respondent's overall financial standing in light of the fact that
respondent is operating nationwide and the Central Visayas office is only one of its many branches.
Losses or gains of a business entity cannot be fully assessed by isolating or selecting only particular
branches or offices. There are recognized accounting principles and methods by which the business
firm's performance can be objectively and thoroughly evaluated at the end of every fiscal year, and
the assessment accurately reported in the company's financial statement.

That the financial statements are audited by independent auditors safeguards the same from the
manipulation of the figures therein to suit the company's needs. The auditing of financial reports by
independent external auditors are strictly governed by national and international standards and
regulations for the accounting profession. It bears to stress that the financial statements submitted
by respondent were audited by reputable auditing firms. Hence, petitioner's assertion that
respondent merely manipulated its financial statements to make it appear that it was suffering from
business losses that would justify the retrenchment is incredible and baseless.

In addition, the fact that the financial statements were audited by independent auditors settles any
doubt on the authenticity of these documents for lack of signature of the person who prepared it. As
reported by SGV & Co., the financial statements presented fairly, in all material aspects, the financial
position of the respondent as of 30 June 1998 and 1997, and the results of its operations and its cash
flows for the years ended, in conformity with the generally accepted accounting principles.25

In fact, even granting arguendo that respondent was not experiencing losses, it is still

authorized by Article 28326 of the Labor Code to cease its business operations. Explicit in
the said provision is that closure or cessation of business operations is allowed even if the
business is not undergoing economic losses. The owner, for any bona fide reason, can
lawfully close shop anyone. Just as no law forces anyone to go into business, no law can
compel anybody to continue in it. It would indeed be stretching the intent and spirit of the
law if we were to unjustly interfere with the management's prerogative to close or cease
its business operations, just because said business operations are not suffering any loss or
simply to provide the worker's continued employment.27

The law recognizes the right of every business entity to reduce its work force if the same is made
necessary by compelling economic factors which would endanger its existence or stability. In spite of
overwhelming support granted by the social justice provisions of our Constitution in favor of labor,
the fundamental law itself guarantees, even during the process of tilting the scales of social justice
towards workers and employees, "the right of enterprises to reasonable returns of investment and to
expansion and growth." To hold otherwise would not only be oppressive and inhuman, but also
counter-productive and ultimately subversive of the nation's thrust towards a resurgence in our
economy which would ultimately benefit the majority of our people. Where appropriate and where
conditions are in accord with law and jurisprudence, the Court has authorized valid reductions in the
work force to forestall business losses, the hemorrhaging of capital, or even to recognize an obvious
reduction in the volume of business which has rendered certain employees redundant.28

We also find that the respondent complied with the requisite notices to the employee and the DOLE
to effect a valid retrenchment. Petitioner failed to refute that she received the written notice of
retrenchment from respondent on 16 November 1998. Although respondent failed to furnish DOLE
with a formal letter notifying it of the retrenchment, it still substantially complied with the
requirement. Since the National Conciliation and Mediation Board, the reconciliatory arm of DOLE,

Labor II – 1
supervised the negotiation for separation package, we agree with the Court of Appeals that it would
be superfluous to still require respondent to serve notice of the retrenchment to DOLE.

The separation package offered by respondent to its employees was way above the minimum
requirement set by law. Aside from the separation pay equivalent to one-month salary for every year
of service, respondent offered additional monetary benefits such as one and a half month salary, pro-
rated 13th month pay, conversion of unused sick and vacation leave credits, and Health Maintenance
Organization and group life insurance coverage until full payment of the separation package.

Petitioner's proposition that she was not a union member and, therefore, not legally bound by the
terms of the Collective Bargaining Agreement, is irrelevant in the instant controversy. Non-
membership in a union does not exempt an employee from the application of Article 283 of the Labor
Code which enumerates the authorized causes for terminating employment. In this case, petitioner
was terminated pursuant to the retrenchment program implemented by respondent. As discussed
above, the respondent complied with the legal requirements for a valid retrenchment. Therefore,
petitioner's separation from employment was legal and valid.

Consequently, petitioner is not entitled to backwages. It is well settled that backwages may be
granted only when there is a finding of illegal dismissal.29 Nevertheless, petitioner is entitled to
separation pay as provided under respondent's Staff Reduction Program Package equivalent to one-
month salary for every year of service, one and a half month salary, pro-rated 13th month pay,
conversion to cash of unused vacation and sick leave credits, and Health Maintenance Organization
and group life insurance coverage until full payment of the separation package.

WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision
dated 12 July 2005 and its Resolution dated 22 March 2006 in CA-G.R. SP No. 79440 are
hereby AFFIRMED. Costs against the petitioner.

Labor II – 1
 27.) [G.R. NO. 163147 : October 10, 2007]

LINTON COMMERCIAL CO., INC. and DESIREE ONG, Petitioners, v. ALEX A. HELLERA,

FRANCISCO RACASA, DANTE ESCARLAN, DONATO SASA, RODOLFO OLINAR, DANIEL
CUSTODIO, ARTURO POLLO, ROBERT OPELIÑA, B. PILAPIL, WINIFREG BLANDO, JUANITO
GUILLERMO, DONATO BONETE, ISAGANI YAP, CESAR RAGONON, BENEDICTO ILAGAN,
REXTE SOLANOY, RODOLFO LIM, ERNESTO ALCANTARA, DANTE DUMAPE, FELIPE CAGOCO,
JR., JOSE NARCE, NELIO CANTIGA, QUIRINO C. ADA, MANUEL BANZON, JOEL F. ADA,
SATPARAM ELMER, ROMEO BALAIS, CLAUDIO S. MORALES, DANILO NORLE, LEONCIO
RACASA, NOEL LEONCIO RACASA, NOEL ACEDILLA, ELPIDIO E. VERGABINIA, JR.,
CONRADO CAGOCO, ROY BORAGOY, EDUARDO GULTIA, REYNALDO SANTOS, LINO
VALENCIA, ROY DURANO, LEO VALENCIA, ROBERTO BLANDO, JAYOMA A., NOMER
ALTAREJOS, RAMON OLINAR III, SATURNINO C. EBAYA, FERNANDO R. REBUCAS, NICANOR
L. DE CASTRO, EDUARDO GONZALES, ISAGANI GONZALES, THOMAS ANDRAB, JR., MINIETO
DURANO, ERNESTO VALLENTE, NONITO I. DULA, NESTOR M. BONETE, JOSE SALONOY,
ALBERTO LAGMAN, ROLANDO TORRES, ROLANDO TOLDO, ROLINDO CUALQUIERA,
ARMANDO LIMA, FELIX D. DUMARE, ALFREDO SELAPIO, MARTIN V. VILLACAMPA, JR.,
CARLITO PABLE, DANTE ESCARLAN, M. DURANO, RAMON ROSO, LORETA RAFAEL, and
ELEZAR MELLEJOR, Respondents.

DECISION

TINGA, J.:

This is a Petition for Review under Rule 45 of the Rules of Civil Procedure seeking the reversal of the
Decision1 of the Court of Appeals promulgated on 12 December 2003 as well as its
Resolution2 promulgated on 2 April 2004 denying petitioners' motion for reconsideration.

This case originated from a labor complaint filed before the National Labor Relations Commission
(NLRC) in which herein respondents contended that petitioner Linton Commercial Company, Inc.
(Linton) had committed illegal reduction of work when it imposed a reduction of work hours thereby
affecting its employees.

Linton is a domestic corporation engaged in the business of importation, wholesale, retail and
fabrication of steel and its by-products.3 Petitioner Desiree Ong is Linton's vice president.4 On 17
December 1997, Linton issued a memorandum5 addressed to its employees informing them of the
company's decision to suspend its operations from 18 December 1997 to 5 January 1998 due to the
currency crisis that affected its business operations. Linton submitted an establishment termination
report6 to the Department of Labor and Employment (DOLE) regarding the temporary closure of the
establishment covering the said period. The company's operation was to resume on 6 January 1998.

On 7 January 1997,7 Linton issued another memorandum8 informing them that effective 12 January

1998, it would implement a new compressed workweek of three (3) days on a rotation basis. In
other words, each worker would be working on a rotation basis for three working days only instead
for six days a week. On the same day, Linton submitted an establishment termination
report9 concerning the rotation of its workers. Linton proceeded with the implementation of the
new policy without waiting for its approval by DOLE.

Aggrieved, sixty-eight (68) workers (workers) filed a Complaint for illegal reduction of
workdays with the Arbitration Branch of the NLRC on 17 July 1998.

On the other hand, the workers pointed out that Linton implemented the reduction of work hours
without observing Article 283 of the Labor Code, which required submission of notice thereof to DOLE
Labor II – 1
one month prior to the implementation of reduction of personnel, since Linton filed only the
establishment termination report enacting the compressed workweek on the very date of its
implementation.10

Petitioners, on the other hand, contended that the devaluation of the peso created a negative impact
in international trade and affected their business because a majority of their raw materials were
imported. They claimed that their business suffered a net loss of P3,569,706.57 primarily due to
currency devaluation and the slump in the market. Consequently, Linton decided to reduce the
working days of its employees to three (3) days on a rotation basis as a cost-cutting measure.
Further, petitioners alleged that the compressed workweek was actually implemented on 12 January
1998 and not on 7 January 1998, and that Article 283 was not applicable to the instant case.11

Pending decision of the Labor Arbiter, twenty-one (21) of the workers signed individual release and
quitclaim documents stating that they had voluntarily tendered their resignation as employees of
Linton and that they had been fully paid of all monetary compensation due them.12

On 28 January 2000, the Labor Arbiter rendered a Decision13 finding petitioners guilty of illegal
reduction of work hours and directing them to pay each of the workers their three (3) days/week's
worth of work compensation from 12 January 1998 to 13 July 1998.

Petitioners appealed to the National Labor Relations Commission (NLRC). In a

Resolution14 promulgated on 29 June 2001, the NLRC reversed the decision of the Labor Arbiter. The
NLRC held that an employer has the prerogative to control all aspects of employment in its business
organization, including the supervision of workers, work regulation, lay-off of workers, dismissal and
recall of workers. The NLRC took judicial notice of the Asian currency crisis in 1997 and 1998 thus
finding Linton's decision to implement a compressed workweek as a valid exercise of management
prerogative. Moreover, the NLRC ruled that Article 283 of the Labor Code, which requires an
employer to submit a written notice to DOLE one (1) month prior to the closure or reduction of
personnel, is not applicable to the instant case because no closure was undertaken and no reduction
of employees was implemented by Linton. Lastly, the NLRC took note that there were twenty-one
(21) complainants-workers15 who had already resigned and executed individual waivers and
quitclaims. Consequently, the NRLC considered them as dropped from the list of complainants. The
workers' motion for reconsideration was denied in a Resolution16 dated 24 September 2001.

The workers then filed before the Court of Appeals17 a petition for certiorari under Rule 65 of the
Rules of Civil Procedure assailing the decision18 of the NLRC and its resolution19 that denied their
Motion for Reconsideration. In the petition, the workers claimed that the NLRC erred in finding that
the one (1) month notice requirement under Article 283 of the Labor Code did not apply to the
instant case; that Linton did not exceed the limits of its business prerogatives; and that Linton was
able to establish a factual basis on record to justify the reduction of work days.

In its Comment,20 Linton highlighted the fact that the caption, the body as well as the verification of
the petition submitted by complainants-workers indicated solely "Alex Hellera, et al." as petitioners.
Linton argued that the petition was defective and did not necessarily include the other workers in the
proceedings before the NLRC. Linton also mentioned that 21 out of the 68 complainants-workers
executed individual resignation letters and individual waivers and quitclaims.21 With these waivers
and quitclaims, Linton raised in issue whether the petition still included the signatories of said
documents. Moreover, Linton pointed out that the caption of the petition did not include the NLRC as
party respondent, which made for another jurisdictional defect. The rest of its arguments were
merely a reiteration of its arguments before the NLRC.

In reversing the NLRC, the Court of Appeals, in its Decision22 dated 12 December 2003 ruled that the
failure to indicate all the names of petitioners in the caption of the petition was not violative of the
Rules of Court because the records of the case showed that there were sixty-eight (68) original

Labor II – 1
complainants who filed the complaint before the Arbitration Branch of the NLRC. The appellate court
likewise considered the quitclaims and release documents as "ready documents" which did not
change the fact that the 21 workers were impelled to sign the same. The appellate court gave no
credence to the said quitclaims, considering the economic disadvantage that would be suffered by the
employees. The appellate court also noted that the records did not show that the 21 workers desisted
from pursuing the petition and that the waivers and quitclaims would not bar the 21 complainants
from continuing the action.23

On the failure to include the NLRC as party respondent, the appellate court treated the NLRC as a
nominal party which ought to be joined as party to the petition simply because the technical rules
require its presence on record. The inclusion of the NLRC in the body of the petition was deemed by
the appellate court as substantial compliance with the rules.

On the main issues, the Court of Appeals ruled that the employees were constructively dismissed
because the short period of time between the submission of the establishment termination report
informing DOLE of its intention to observe a compressed workweek and the actual implementation
thereat was a manifestation of Linton's intention to eventually retrench the employees. It found that
Linton had failed to observe the substantive and procedural requirements of a valid dismissal or
retrenchment to avoid or minimize business losses since it had failed to present adequate, credible
and persuasive evidence that it was indeed suffering, or would imminently suffer, from drastic
business losses. Linton's financial statements for 1997-1998 showed no indication of financial losses,
and the alleged loss of P3,645,422.00 in 1997 was considered insubstantial considering its total asset
of P1,065,948,601.00.Hence, the appellate court considered Linton's losses as de minimis.24

Lastly, the appellate court found Linton to have failed to adopt a more sensible means of cutting the
costs of its operations in less drastic measures not grossly unfavorable to labor. Hence, Linton failed
to establish enough factual basis to justify the necessity of a reduced workweek.25

Petitioners filed a motion for reconsideration26 which the appellate court denied through a
Resolution27 dated 2 April 2004.

In filing the instant Petition for Review, petitioners allege that the Court of Appeals erred when it
considered the petition as having been filed by all sixty (68) workers, in disregard of the fact that
only "Alex Hellera, et al." was indicated as petitioner in the caption, body and verification of the
petition and twenty-one (21) of the workers executed waivers and quitclaims. Petitioners further
argue that the Court of Appeals erred in annulling the release and quitclaim documents signed by 21
employees because no such relief was prayed for in the petition. The validity of the release and
quitclaim was also not raised as an issue before the labor arbiter nor the NLRC. Neither was it raised
in the very petition filed before the Court of Appeals. Petitioners conclude that the Court of Appeals,
therefore, had invalidated the waivers and quitclaims motu proprio.

Petitioners also allege that the Court of Appeals erred when it held that the reduction of
workdays is equivalent to constructive dismissal. They posit that there was no reduction of
salary but instead only a reduction of working days from six to three days per week.
Petitioners add that the reduction of workdays, while not expressly covered by any of the
provisions of the Labor Code, is analogous to the situation contemplated in Article 286 28 of
the Labor Code because the company implemented the reduction of workdays to address
its financial losses. Lastly, they note that since there was no retrenchment, the one-month
notice requirement under Article 283 of the Labor Code is not applicable.

First, we resolve the procedural issues of the case. Rule 7, Section 1 of the Rules of Court states that
the names of the parties shall be indicated in the title of the original complaint or petition. However,
the rules itself endorses its liberal construction if it promotes the objective of securing a just, speedy
and inexpensive disposition of the action or proceeding.29 Pleadings shall be construed liberally so as

Labor II – 1
to render substantial justice to the parties and to determine speedily and inexpensively the actual
merits of the controversy with the least regard to technicalities.30

In Vlason Enterprises Corporation v. Court of Appeals 31 the Court pronounced that, while the general
rule requires the inclusion of the names of all the parties in the title of a complaint, the non-inclusion
of one or some of them is not fatal to the cause of action of a plaintiff, provided there is a statement
in the body of the petition indicating that a defendant was made a party to such action. If
in Vlason the Court found that the absence of defendant's name in the caption would not cause the
dismissal of the action, more so in this case where only the names of some of petitioners were not
reflected. This is consistent with the general rule that mere failure to include the name of a party in
the title of a complaint is not fatal by itself.32

Petitioners likewise challenge the absence of the names of the other workers in the body and
verification of the petition. The workers' petition shows that the petition stipulated as parties-
petitioners "Alex A. Hellera, et al." as employees of Linton, meaning that there were more than one
petitioner who were all workers of Linton. The petition also attached the resolution33 of the NLRC
where the names of the workers clearly appear. As documents attached to a complaint form part
thereof,34 the petition, therefore has sufficiently indicated that the rest of the workers were parties to
the petition.

With respect to the absence of the workers' signatures in the verification, the verification
requirement is deemed substantially complied with when some of the parties who undoubtedly have
sufficient knowledge and belief to swear to the truth of the allegations in the petition had signed the
same. Such verification is deemed a sufficient assurance that the matters alleged in the petition have
been made in good faith or are true and correct, and not merely speculative.35 The verification in the
instant petition states that Hellera, the affiant, is the president of the union of "which complainants
are all members and officers."36 As the matter at hand is a labor dispute between Linton and its
employees, the union president undoubtedly has sufficient knowledge to swear to the truth of the
allegations in the petition. Hellera's verification sufficiently meets the purpose of the requirements
set by the rules.

Moreover, the Court has ruled that the absence of a verification is not jurisdictional, but only a formal
defect.37 Indeed, the Court has ruled in the past that a pleading required by the Rules of Court to be
verified may be given due course even without a verification if the circumstances warrant the
suspension of the rules in the interest of justice.38

We turn to the propriety of the Court of Appeals' ruling on the invalidity of the waivers and quitclaims
executed by the 21 workers. It must be remembered that the petition filed before the Court of
Appeals was a petition for certiorari under Rule 65 in which, as a rule, only jurisdictional questions
may be raised, including matters of grave abuse of discretion which are equivalent to lack of
jurisdiction.39 The issue on the validity or invalidity of the waivers and quitclaims was not raised as an
issue in the petition. Neither was it raised in the NLRC. There is no point of reference from which one
can determine whether or not the NLRC committed grave abuse of discretion in its finding on the
validity and binding effect of the waivers and quitclaims since this matter was never raised in issue in
the first place.

In addition, petitioners never had the opportunity to support or reinforce the validity of the waivers
and quitclaims because the authenticity and binding effect thereof were never challenged. In the
interest of fair play, justice and due process, the documents should not have been unilaterally
evaluated by the Court of Appeals. Thus, the corresponding modification of its Decision should be
ordained.

After resolving the technical aspects of this case, we now proceed to the merits thereof. The main
issue in this labor dispute is whether or not there was an illegal reduction of work when

Labor II – 1
Linton implemented a compressed workweek by reducing from six to three the number of
working days with the employees working on a rotation basis.

In Philippine Graphic Arts, Inc. v. NLRC,40 the Court upheld for the validity of the reduction of working
hours, taking into consideration the following: the arrangement was temporary, it was a more
humane solution instead of a retrenchment of personnel, there was notice and consultations with the
workers and supervisors, a consensus were reached on how to deal with deteriorating economic
conditions and it was sufficiently proven that the company was suffering from losses.

The Bureau of Working Conditions of the DOLE, moreover, released a bulletin41 providing for in
determining when an employer can validly reduce the regular number of working days. The said
bulletin states that a reduction of the number of regular working days is valid where the arrangement
is resorted to by the employer to prevent serious losses due to causes beyond his control, such as
when there is a substantial slump in the demand for his goods or services or when there is lack of
raw materials.

Although the bulletin stands more as a set of directory guidelines than a binding set of implementing
rules, it has one main consideration, consistent with the ruling in Philippine Graphic Arts Inc., in
determining the validity of reduction of working hours'that the company was suffering from losses.

Petitioners attempt to justify their action by alleging that the company was suffering from financial
losses owing to the Asian currency crisis. Was petitioners' claim of financial losses supported by
evidence? cra lawlibrary

The lower courts did not give credence to the income statement submitted by Linton because the
same was not audited by an independent auditor.42 The NLRC, on the other hand, took judicial notice
of the Asian currency crisis which resulted in the devaluation of the peso and a slump in market
demand.43 The Court of Appeals for its part held that Linton failed to present adequate, credible and
persuasive evidence to show that it was in dire straits and indeed suffering, or would imminently
suffer, from drastic business losses. It did not find the reduction of work hours justifiable, considering
that the alleged loss of P3,645,422.00 in 1997 is insubstantial compared to Linton's total asset
of P1,065,948,601.76.44

A close examination of petitioners' financial reports for 1997-1998 shows that, while the company
suffered a loss of P3,645,422.00 in 1997, it retained a considerable amount of earnings45 and
operating income.46 Clearly then, while Linton suffered from losses for that year, there remained
enough earnings to sufficiently sustain its operations. In business, sustained operations in the black
is the ideal but being in the red is a cruel reality. However, a year of financial losses would not
warrant the immolation of the welfare of the employees, which in this case was done through a
reduced workweek that resulted in an unsettling diminution of the periodic pay for a protracted
period. Permitting reduction of work and pay at the slightest indication of losses would be contrary to
the State's policy to afford protection to labor and provide full employment.47

Certainly, management has the prerogative to come up with measures to ensure profitability or loss
minimization. However, such privilege is not absolute. Management prerogative must be exercised in
good faith and with due regard to the rights of labor.48

As previously stated, financial losses must be shown before a company can validly opt to reduce the
work hours of its employees. However, to date, no definite guidelines have yet been set to determine
whether the alleged losses are sufficient to justify the reduction of work hours. If the standards set in
determining the justifiability of financial losses under Article 283 (i.e., retrenchment) or Article 286
(i.e., suspension of work) of the Labor Code were to be considered, petitioners would end up failing
to meet the standards. On the one hand, Article 286 applies only when there is a bona fide
suspension of the employer's operation of a business or undertaking for a period not exceeding six

Labor II – 1
(6) months.49 Records show that Linton continued its business operations during the effectivity of the
compressed workweek, which spanned more than the maximum period. On the other hand, for
retrenchment to be justified, any claim of actual or potential business losses must satisfy the
following standards: (1) the losses incurred are substantial and not de minimis; (2) the losses are
actual or reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be
effective in preventing the expected losses; and (4) the alleged losses, if already incurred, or the
expected imminent losses sought to be forestalled, are proven by sufficient and convincing
evidence.50 Linton failed to comply with these standards.

All taken into account, the compressed workweek arrangement was unjustified and illegal. ςηαñrοblεš  Î½Î¹r† Ï…αl  lαω  lιbrαrà ¿

Thus, petitioners committed illegal reduction of work hours.

In assessing the monetary award in favor of respondents, the Court has taken the following factors
into account:

(1) The compressed workweek arrangement was lifted after six (6) months, or on 13 July
1998.51 Thus, Linton resumed its regular operations and discontinued the emergency measure;

(2) The claims of the workers, as reflected in their pleadings, were narrowed to petitioners' illegal
reduction of their work hours and the non-payment of their compensation for three (3) days a week
from 12 January 1998 to 13 July 1998. They did not assert any other claims;

(3) As found by the NLRC, 21 of the workers are no longer entitled to any monetary award since they
had already executed their respective waivers and quitclaims. We give weight to the finding and
exclude the 21 workers as recipients of the award to be granted in this case. Consequently, only the
following workers are entitled to the award, with the amounts respectively due them stated opposite
their names:

1. Alex A. Hellera - P16,368.30

2. Francisco Racasa - 16,458.00
3. Dante Escarlan - 15,912.00
4. Donato Sasa - 15,580.50
5. Rodolfo Olinar - 15,912.00
6. Daniel Custodio - 15,912.00
7. Arturo Pollo - 16,660.80
8. B. Pilapil - 16,075.80
9. Donato Bonete - 15,600.00
10. Isagani Yap - 15,678.00
11. Cesar Ragonon - 16,068.00
12. Benedicto Bagan - 15,775.50
13. Rexte Solanoy - 15,678.00

Labor II – 1
 14. Felipe Cagoco, Jr. - 15,990.00
15. Jose Narce - 16,348.80
16. Quirino C. Ada - 15,990.00
17. Salfaram Elmer - 16,302.00
18. Romeo Balais - 16,302.00
19. Claudio S. Morales - 15,947.10
20. Elpidio E. Vergabinia - 15,561.00
21. Conrado Cagoco - 15,990.00
22. Roy Boragoy - 15,892.50
23. Reynaldo Santos - 16,200.60
24. Lino Valencia - 15,678.00
25. Roy Durano - 15,678.00
26. Leo Valencia - 15,678.00
27. Jayoma A. - 15,561.00
28. Ramon Olinar III - 15,678.00
29. Saturnino C. Ebaya - 15,919.80
30. Nicanor L. de Castro - 16,614.00
31. Eduardo Gonzales - 15,678.00
32. Isagani Gonzales - 16,469.70
33. Thomas Andrab, Jr. - 15,912.00
34. Minieto Durano - 16,660.80
35. Ernesto Vallente - 15,997.80
36. Nestor M. Bonete - 15,705.30
37. Jose Salonoy - 16,458.00
38. Alberto Lagman - 16,660.80
39. Rolando Torres - 15,678.00
40. Rolindo Cualquiera - 16,068.00
41. Armando Lima - 16,426.80
42. Alfredo Selapio - 16,060.20

Labor II – 1
 43. Martin V. Villacampa - 15,939.30
44. Carlito Pable - 16,263.00
45. Dante Escarlan -
ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ  15,912.00 46. M. Durano - 16,614.00 47. Ramon Roso - 16,302.00 52

(4) The Labor Arbiter's decision in favor of respondents was reversed by the NLRC. Considering that
there is no provision for appeal from the decision of the NLRC,53 petitioners should not be deemed at
fault in not paying the award as ordered by the Labor Arbiter. Petitioners' liability only gained a
measure of certainty only when the Court of Appeals reversed the NLRC decision. In the interest of
justice, the 6% legal interest on the award should commence only from the date of promulgation of
the Court of Appeals' Decision on 12 December 2003.

WHEREFORE, the Petition is GRANTED IN PART. The decision of the Court of Appeals reinstating the
decision of the Labor Arbiter is AFFIRMED with MODIFICATION to the effect that the 21 workers who
executed waivers and quitclaims are no longer entitled to back payments. Petitioners are ORDERED
TO PAY respondents, except the aforementioned 21 workers, the monetary award as
computed,54 pursuant to the decision of the Labor Arbiter55 with interest at the rate of 6% per annum
from 12 December 2003, the date of promulgation of the Court of Appeals' decision, until the finality
of this decision, and thereafter at the rate of 12% per annum until full payment.

Labor II – 1
28.) G.R. No. 166703             April 14, 2008

AMA COMPUTER COLLEGE, INC., petitioner,

vs.
ELY GARCIA and MA. TERESA BALLA, respondents.

DECISION

CHICO-NAZARIO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to reverse the Decision1 dated 30
August 2004 of the Court of Appeals in CA-G.R. SP No. 81808 affirming the Decision dated 29 May 2003 of the
National Labor Relations Commission (NLRC) in NLRC NCR 00-03-01898-00. The NLRC, in its Decision, affirmed
the Labor Arbiter's Decision dated 25 March 2002, finding that the dismissal by petitioner AMA Computer College,
Inc. (ACC) of respondents Ely Garcia (Garcia) and Ma. Teresa Balla (Balla) was illegal and granting of backwages
and separation pay; but modified the same by deleting the grant of 13th month pay, service incentive leave pay and
cost of living allowance. The Court of Appeals, in its Resolution dated 1 December 2004, denied ACC's motion for
reconsideration of its earlier Decision.

The factual antecedents of the case are as follows:

Garcia was hired as a janitress by ACC on 6 January 1988. On 15 May 1989, her employment status was changed
to probationary Library Aide. She became a regular employee on 15 February 1990.

Balla was hired as a Social Worker by ACC on 1 August 1996. She later became a Guidance Assistant in the
Guidance Department of ACC, and on 2 June 1997, became a regular employee.

On 21 March 2000, Anthony R. Vince Cruz, ACC Human Resource Director, informed Garcia and Balla and 52
other employees of the termination of their employment, thus:

This is to formally inform you that due to the prevailing economic condition of our economy and as part of
the austerity program of the company, the top management has decided to come up with a manpower
review of the AMA Group of Companies in order to streamline its operation and the growth of the
Organization.

In view of this, your position as Library Aide [for Ely; Guidance Assistant, for Teresa] has (sic) been found no
longer necessary for the reason that your function can be handled by the other existing staff.

Thus, we regret to inform you effective April 21, 2000, your employment with AMA Group of Companies is
hereby terminated. x x x.2

Thereafter, Garcia and Balla filed a complaint with the Labor Arbiter for illegal dismissal and prayed for the payment
of separation pay, 13th month pay, and attorney's fees, alleging that ACC's streamlining program was tainted with
bad faith as there was no fair and reasonable criteria used therein, such as the less preferred status, efficiency
rating and authority. They asserted that certain acts of ACC belied its claim of being adversely affected by the
prevailing economic conditions, and that the statistics and pattern of dismissal by the college indicate a nefarious
intent to circumvent the law on the security of tenure.

ACC, in its position paper, countered that Garcia and Balla's dismissal was due to the legitimate streamlining by the
company.

On 25 March 2002, the Labor Arbiter ruled that Garcia and Balla were illegally dismissed and ordered the payment
of their backwages and additional separation pay. The dispositive portion of the Labor Arbiter's Decision3 reads:

Labor II – 1
 Wherefore, premises all considered, judgment is hereby rendered finding the dismissal illegal and ordering
respondent [petitioner ACC] to pay complainants [Garcia and Balla] backwages and additional separation
pay.

The Research and Computation Unit, (sic) this Commission is hereby directed to effect the necessary
computation which shall form part of this decision.

Aggrieved by the Labor Arbiter's afore-quoted Decision, ACC appealed to the NLRC.

On 20 May 2003, the NLRC4 affirmed the assailed Decision of the Labor Arbiter with the modification of deleting the
award of 13th month pay, service incentive leave pay and cost of living allowance. The NLRC thus ordered:

While We are in accord with the finding that complainants were illegally dismissed from employment, We
find the inclusion of the relief of 13th month pay, Service Incentive Leave Pay and Cost of Living Allowance
as inappropriate.

Quite notable from the pro-forma complaint that no prayer for payment of cost of living allowance or service
incentive leave pay was indicated therein by the complainants (Records, p. 2). And, while they may have
indicated non-payment of the 13th month benefit as a cause of action, nowhere in the Labor Arbiter's
decision can it be gleaned that the said relief was adjudged in favor of the complainants. Deletion of the
aforesaid monetary award is, therefore, decreed.

WHEREFORE, premises considered, the decision under review is hereby MODIFIED by DELETING the
relief of 13th month pay, service incentive leave pay and cost of living allowance therefrom.

In other respects, the decision, insofar as it orders the payment to the complainants [Garcia and Balla] their
backwages and additional separation pay, shall stand AFFIRMED.

ACC filed a Motion for Reconsideration of the foregoing but the same was denied5 by the NLRC in a Resolution
dated 30 October 2003.

ACC then appealed6 by way of Petition for Certiorari under Rule 65 of the Rules of Court to the Court of Appeals
alleging that the NLRC gravely abused its discretion amounting to lack or in excess of jurisdiction in only partially
modifying the Decision of the Labor Arbiter and affirming the rest thereof.

On 30 August 2004, the Court of Appeals rendered a Decision7 affirming the Decision of the NLRC. In its Decision,
the Court of Appeals ruled that inquiry in a Petition for Certiorari under Rule 65 of the Rules of Court is limited
exclusively to the issue of whether or not respondent acted with grave abuse of discretion, amounting to lack or in
excess of jurisdiction, and does not go as far as to evaluate the sufficiency of evidence upon which the NLRC and
the Labor Arbiter based their determination.

ACC filed a motion for reconsideration but was denied by the Court of Appeals in a Resolution8 dated 1 December
2004.

Hence, the present Petition for Review under Rule 45 of the Rules of Court filed by ACC raising the following
errors9 of the Court of Appeals:

THE COURT OF APPEALS GRAVELY ERRED IN DEPARTING FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL REVIEW[.]

THE COURT OF APPEALS GRAVELY ERRED WHEN IT SUSTAINED THE FINDING OF ILLEGAL
DISMISSAL NOTWITHSTANDING THE SUBSTANTIAL EVIDENCE ADDUCED BY PETITIONER TO THE
CONTRARY[.]

THE COURT OF APPEALS GRAVELY ERRED WHEN IT REFUSED TO RECOGNIZE REDUNDANCY AS

A BASIS IN TERMINATING THE SERVICES OF RESPONDENT[S].
Labor II – 1
On 18 April 2005, We required10 Garcia and Balla to file their Comment within ten days from notice, but they failed to
comply therewith despite notice.

As a consequence, we required11 Garcia and Balla to show cause why they should not be held in contempt of court
for failure to file their desired comment. Again, they failed to comply with our show cause order, thus, we
imposed12 upon them a fine of P500.00 each payable within ten days from receipt of notice.

Still failing to receive any response from Garcia and Balla, we required13 ACC, on 2 October 2006, to inform the
Court of their current addresses.

In a Manifestation14 dated 18 January 2007, ACC stated that, as for Garcia, it has the same address as the one
being considered by the Court; and as to Balla, all pleadings and orders in the course of the proceedings before the
NLRC and the Court of Appeals were served to her through Garcia's address.

In a Resolution dated 28 February 2007, we noted ACC's Manifestation but considered its compliance
unsatisfactory. We required ACC to exert more effort in locating Garcia's present address and to inform the Court
thereof within ten days from notice.15

ACC through counsel failed to comply with our 28 February 2007 Resolution, thus, we required16 its counsel to show
cause why it should not be held in contempt for failure to submit the addresses of Garcia and Balla despite notice.

In a Compliance17 dated 5 December 2007, ACC through counsel apologized for its inadvertence and asked for an
extension within which to comply with the 28 February 2007 Resolution, which was granted.18

ACC's counsel would later inform us that various ways were employed to search for Garcia's address, such as
searches through the telephone directories, internet and personal inquiries, but to no avail. Hence, ACC requested
for another extension,19 which was again granted.

In a Manifestation, dated 5 January 2007, ACC through counsel stated that it already made a personal inquiry at
Garcia's previous address, but still without success.

Thus, we resolved to dispense with Garcia and Balla's comment and submitted the case for decision based on the
pleadings filed.

Even without Garcia and Balla's comment, this Court denies ACC's Petition.

The issues for resolution are factual and Rule 45 of the Rules of Court provides that only questions of law may be
raised in a petition for review on certiorari. The raison d'etre is that the Court is not a trier of facts. It is not to
reexamine and reevaluate the evidence on record. Moreover, the factual findings of the NLRC, as affirmed by the
Court of Appeals, are accorded high respect and finality unless the factual findings and conclusions of the Labor
Arbiter clash with those of the NLRC and the Court of Appeals in which case, the Court will have to review the
records and the arguments of the parties to resolve the factual issues and render substantial justice to the parties.20

In termination cases, the burden of proving just and valid cause for dismissing an employee from his employment
rests upon the employer, and the latter's failure to discharge that burden would result in a finding that the dismissal
is unjustified.21

It must be stressed at the outset that ACC raised different grounds to justify its dismissal of Garcia and Balla: before
the Labor Arbiter, it cited retrenchment; before the NLRC, it claimed redundancy; and before the Court of Appeals, it
averred both retrenchment and redundancy.

It is apparent that ACC itself is confused as to the real reason why it terminated Garcia and Balla's employment.

Both retrenchment and redundancy are authorized causes for the termination of employment. According to Article
283 of the Labor Code:

Labor II – 1
 ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
worker and the 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
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.

Although governed by the same provision of the Labor Code, retrenchment and redundancy are two distinct
grounds for termination arising from different circumstances, thus, they are in no way interchangeable.

Redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to meet
the demands of the business enterprise. A reasonably redundant position is one rendered superfluous by any
number of factors, such as overhiring of workers, decreased volume of business, dropping of a particular product
line previously manufactured by the company or phasing out of service activity priorly undertaken by the business.
Among the requisites of a valid redundancy program are: (1) the good faith of the employer in abolishing the
redundant position; and (2) fair and reasonable criteria in ascertaining what positions are to be declared
redundant and accordingly abolished.22

The determination that the employee's services are no longer necessary or sustainable and, therefore, properly
terminable for being redundant 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 of such redundancy to
justify the dismissal of the affected employees.23

In Panlilio v. National Labor Relations Commission, 24 it was held that the following evidence may be proffered to
substantiate redundancy: the new staffing pattern, feasibility studies/proposal on the viability of the newly created
positions, job description and the approval by the management of the restructuring.

In the case at bar, ACC attempted to establish its streamlining program by presenting its new table of organization.
ACC also submitted a certification25 by its Human Resources Supervisor, Ma. Jazmin Reginaldo, that the functions
and duties of many rank and file employees, including the positions of Garcia and Balla as Library Aide and
Guidance Assistant, respectively, are now being performed by the supervisory employees. These, however, do not
satisfy the requirement of substantial evidence that a reasonable mind might accept as adequate to support a
conclusion.26 As they are, they are grossly inadequate and mainly self-serving. More compelling evidence would
have been a comparison of the old and new staffing patterns, a description of the abolished and newly created
positions, and proof of the set business targets and failure to attain the same which necessitated the reorganization
or streamlining.

To further justify its dismissal of Garcia and Balla, ACC presented several memoranda to prove that Garcia and
Balla had been remiss in the performance of their duties, as well as perennially tardy and absent. Other than being
self-serving, said memoranda are irrelevant to prove redundancy of the positions held by Garcia and Balla.
Redundancy arises because there is no more need for the employee's position in relation to the whole business
organization, and not because the employee unsatisfactorily performed the duties and responsibilities required by
his position. Redundancy is an authorized cause for termination of employment under Article 282 of the Labor Code;
while serious misconduct or willful disobedience or gross and habitual neglect of duties by the employee is a just
cause for dismissal under Article 283 of the Code.

The lingering doubt as to the existence of redundancy or of ACC's so called "streamlining program" is highlighted
even more by its non-presentation of the required notice27 to the Department of Labor and Employment (DOLE) at
least one month before the intended dismissal.28 The notice to the DOLE would have afforded the labor department
Labor II – 1
the opportunity to look into and verify whether there is truth as to ACC's claim that a decline in its student population
resulted in excess manpower in the college. Compliance with the required notices would have also established that
ACC pursued its streamlining program in good faith.

In balancing the interest between labor and capital, the prudent recourse in termination cases is to safeguard the
prized security of tenure of employees and to require employers to present the best evidence obtainable, especially
so because in most cases, the documents or proof needed to resolve the validity of the termination, are in the
possession of employers. A contrary ruling would encourage employers to utilize redundancy as a means of
dismissing employees when no valid grounds for termination are shown by simply invoking a feigned or
unsubstantiated redundancy program.

Granting that ACC was able to substantiate the need for streamlining its organization, it still failed to implement the
same using fair and reasonable criteria for choosing which employees to dismiss. Among the accepted criteria in
implementing a redundancy are: (a) less preferred status, e.g., temporary employee; (b) efficiency; and (c)
seniority.29 There is no showing that ACC applied any of these criteria in determining that, among its employees,
Garcia and Balla should be dismissed, thus, making their dismissal arbitrary and illegal.

Retrenchment, on the other hand, is the termination of employment effected by management during periods of
business recession, industrial depression, seasonal fluctuations, lack of work or considerable reduction in the
volume of the employer's business.30 Resorted to by an employer to avoid or minimize business losses,31 it is a
management prerogative consistently recognized by this Court.32

There are three 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.33

To justify retrenchment, the employer must prove serious business losses.34 Indeed, not all business losses suffered
by the employer would justify retrenchment under Article 283 of the Labor Code.35 The "loss" referred to in Article
283 cannot be just any kind or amount of loss; otherwise, a company could easily feign excuses to suit its whims
and prejudices or to rid itself of unwanted employees.36

In a number of cases, the Court has identified the necessary conditions for the company losses to justify
retrenchment: (1) the losses incurred are substantial and not de minimis; (2) the losses are actual or
reasonably imminent; (3) the retrenchment is reasonably necessary and is likely to be effective in
preventing the expected losses; and (d) the alleged losses, if already incurred, or the expected imminent
losses sought to be forestalled, are proven by sufficient and convincing evidence.37 ACC miserably failed to
prove any of the foregoing.

In the case at bar, ACC claimed that the retrenchment of Garcia and Balla was justified due to the financial
difficulties experienced by the college that it was made effective in all of its campuses and for all departments; and
appropriate notices were given to Garcia and Balla. But other than its bare allegations, ACC failed to present any
supporting evidence.

Not only was ACC unable to prove its losses, it also failed to present proof that it served the necessary notice to the
DOLE one month before the purported retrenchment of Garcia and Balla.38 As also found by the Labor Arbiter, and
affirmed by the NLRC and the Court of Appeals, ACC did not give Garcia and Balla sufficient separation pay. Falling
short of all the requirements, ACC cannot claim that it had effected a valid retrenchment of Garcia and Balla.

In sum, the Court finds no basis for disturbing the consistent findings of the Labor Arbiter, the NLRC and the Court
of Appeals that ACC was not able to discharge the burden of proving that its dismissal of Garcia and Balla was
valid.

Finally, ACC argues that the Court of Appeals should not have limited its power of review to the finding of grave
abuse of discretion allegedly committed by the NLRC, but should have considered the substantial evidence
adduced by ACC.

Labor II – 1
The contention is without merit.

The extent of judicial review by certiorari of decisions or resolutions of the NLRC, as exercised previously by the
Supreme Court and now by the Court of Appeals, is described in Zarate, Jr. v. Olegario,39 thus –

The rule is settled that the original and exclusive jurisdiction of this Court to review a decision of respondent
NLRC (or Executive Labor Arbiter as in this case) in a petition for certiorari under Rule 65 does not
normally include an inquiry into the correctness of its evaluation of the evidence. Errors of
judgment, as distinguished from errors of jurisdiction, are not within the province of a special civil
action for certiorari, which is merely confined to issues of jurisdiction or grave abuse of discretion. It
is thus incumbent upon petitioner to satisfactorily establish that respondent Commission or executive labor
arbiter acted capriciously and whimsically in total disregard of evidence material to or even decisive of the
controversy, in order that the extraordinary writ of certiorari will lie. By grave abuse of discretion is meant
such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, and it must be
shown that the discretion was exercised arbitrarily or despotically. For certiorari to lie, there must be
capricious, arbitrary and whimsical exercise of power, the very antithesis of the judicial prerogative in
accordance with centuries of both civil law and common law traditions. (Underscoring supplied.)

The Court of Appeals, therefore, can grant the petition for certiorari if it finds that the NLRC, in its assailed decision
or resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily disregarding evidence
which is material or decisive of the controversy.

In Garcia v. National Labor Relations Commission,40 we further defined the scope of the Court of Appeals' power to
review the evidence when the decision of the NLRC is brought before it via a petition for certiorari –

[I]n Ong v. People, we ruled that certiorari can be properly resorted to where the factual findings complained
of are not supported by the evidence on record. Earlier, in Gutib v. Court of Appeals, we emphasized thus:

[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.

And in another case of recent vintage, we further held:

In the review of an NLRC decision through a special civil action for certiorari, resolution is confined
only to issues of jurisdiction and grave abuse of discretion on the part of the labor tribunal. Hence,
the Court refrains from reviewing factual assessments of lower courts and agencies exercising
adjudicative functions, such as the NLRC. Occasionally, however, the Court is constrained to delve
into factual matters where, as in the instant case, the findings of the NLRC contradict those of
the Labor Arbiter.

In this instance, the Court in the exercise of its equity jurisdiction may look into the records of the
case and re-examine the questioned findings. As a corollary, this Court is clothed with ample
authority to review matters, even if they are not assigned as errors in their appeal, if it finds that
their consideration is necessary to arrive at a just decision of the case. The same principles
are now necessarily adhered to and are applied by the Court of Appeals in its expanded jurisdiction
over labor cases elevated through a petition for certiorari; thus, we see no error on its part when it
made anew a factual determination of the matters and on that basis reversed the ruling of the NLRC.
(Underscoring supplied.)

None of the foregoing circumstances exists in this case that would justify the Court of Appeals, in a petition
for certiorari, to look into and re-weigh the evidence on record to determine whether the NLRC committed errors of

Labor II – 1
judgment as regards thereto. Absent exceptional circumstances, the general rule applies and the Court of Appeals
is limited only to ascertaining whether the NLRC acted capriciously and whimsically in total disregard of evidence
material to or decisive of the controversy so as to oust the latter of jurisdiction.

WHEREFORE, the instant Petition is hereby DENIED. The Decision dated 30 August 2004 of the Court of Appeals
in CA-G.R. SP No. 81808 is hereby AFFIRMED. Costs against petitioner.

Labor II – 1
29.) G.R. No. 165757             October 17, 2006

GALAXIE STEEL WORKERS UNION (GSWU-NAFLU-KMU), EDUARDO FLORES, BONIFACIO LABACO,

SALVADOR VERDEFLOR, PAULITO NIEVES, NILO AMENAZOR, BENJAMIN BEDUYA, EUTIQUIO MENESES,
CENON LABACO, DANILO MARANAN, ELISEO LASTIMOSO, JAMES MADERAS, EFREN LABACO, CESARIO
BOLSICO, DARIO DECALAIN, SAMMY CEDENO, PRUDENCIO DELA CRUZ, EDGARDO PASTRANA, DANILO
BERMUDEZ, BILLY BLASCO, ROBERTO PEPINO, RUBEN TENOSO, ORLANDO TUDILLA, JESSIE SACE,
JUNE DALAYAT, FRANCISO LABACO, EDIN DEMAYO, WILFREDO CHENG, JAIME GANDO, JOSELITO
GUANZON, VICTOR DELMUNDO, NATHANIEL PEROY, ROBERTO VIRTUDAZO, RICARDO HILAGA,
RODRIGO FIRMANEZ, RENE VILLA, VERGELIO ICO, NOLITO PANUNCIA, ALDRONICO BAHILLO,
FLORENCIO LANZADEROS, ROLLY ROTIL, BENJAMIN ESCANO, DOMINADOR ABAINCIA, ROMEO LITANG,
NELSON PETALIO, MARIO VILLAMOR, AGUSTIN CONSTANTINO, HERMINIO AGUSTIN, VICTORIO
NEMENZO, MABINI YARCIA, PERCY ZOSIMO, ANGELITO DELOS REYES, ADVINCULA ELMEDULAN,
GORGONIO BOLORAN, ALAN MONIN, JESSIE PACALINGGA, and MICHAEL DACLAG, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, GALAXIE STEEL CORPORATION and RICARDO
CHENG, respondents.

DECISION

CARPIO MORALES, J.:

Assailed via petition for review are issuances of the Court of Appeals in CA-G.R. SP No. 68669, to wit:
Decision1 dated March 26, 2004 denying petitioners’ petition for certiorari and upholding the decision of the National
Labor Relations Commission (NLRC) in NLRC NCR CA No. 026956-00, and Resolution dated October 19, 2004
denying petitioners’ motion for reconsideration of the decision.

Respondent Galaxie Steel Corporation (Galaxie) is a corporation engaged in the business of manufacturing and
sale of re-bars and steel billets which are used primarily in the construction of high-rise buildings. On account of
serious business losses which occurred in 1997 up to mid-1999 totaling around P127,000,000.00,2 Galaxie decided
to close down its business operations.

Galaxie thus filed on July 30, 1999 a written notice with the Department of Labor and Employment (DOLE) informing
the latter of its intended closure and the consequent termination of its employees effective August 31, 1999.3 And it
posted the notice of closure on the corporate bulletin board.4

On September 8, 1999, petitioners Galaxie Steel Workers Union and Galaxie employees filed a complaint for illegal
dismissal, unfair labor practice, and money claims against Galaxie.

The Labor Arbiter, by Decision of October 30, 2000, declared valid Galaxie’s closure of business but nevertheless
ordered it to pay petitioner-employees separation pay, pro-rata 13th month pay, and vacation and sick leave credits.
The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered ordering Respondents to pay complainants separation pay,
pro-rata 13th month pay, and vacation leave and sick leave credits in the following computed amounts:

xxxx

Respondents are further ordered to pay complainants their tax refund for 1999 and to pay 10% attorney’s
fees based on the total withheld labor standard benefits.

The complaint for unfair labor practice, illegal lockout, wage differentials, and other money claims are hereby
disallowed for lack of merit.

SO ORDERED.5
Labor II – 1
On appeal, the NLRC upheld the Labor Arbiter’s decision but reversed the award of pro-rata 13th month pay and
vacation and sick leave credits, the same not being among petitioners’ causes of action as in fact they were not
even mentioned in their pleadings.6 And it reversed too the award for separation pay, the closure of Galaxie’s
business being due to serious business losses. Nevertheless, the NLRC directed Galaxie to grant petitioners, by
way of financial assistance, the same amount given to the employees who had executed quitclaims. Thus the
dispositive portion of the NLRC decision read:

WHEREFORE, the decision appealed from is hereby SET ASIDE. The complaint for unfair labor practice
and illegal dismissal is DISMISSED for lack of merit. The respondent Galaxie Steel Corporation is hereby
ordered to extend as any by way of financial assistance the equivalent of ten (10) day’s (sic) salary for every
year of service to each of the following: Eduardo Flores, Bonifacio Labaco, Salvador Verdeeflor, Paulito
Nieves, Nilo Amenazor, Benjamin Beduya, Eutiquio Meneses, Cenon Labaco, Danilo Maranan, Eliseo
Lastimoso, James Maderas, Efren Labaco, Cesario Bolsico, Dario Cecalain, Sammy Cedeno, Prudencio
dela Cruz, Edgardo Pastrana, Danilo Bermudez, Billy Blasco, Roberto Pepino, Ruben Tenoso, Orlando
Dudilla, Jessie Sace, June Dalayat, Francisco Labaco, Edwin Demayo, Wilfredo Cheng, Jaime Gando,
Joselito Guanzon, Victor Delmundo, Nathaniel Peroy, Roberto Virtudazo, Ricardo Hilaga, Rodrigo Firnanez,
Rene Villa, Vergelio Ico, Nolito Panuncio, Aldronico Bahillo, Florencio Lanzaderos, Rolly Rotil, Benjamin
Escano, Dominador Abaincia, Romeo Litang, Nelson Petalio, Mario Villamor, Agustin Constantino, Herminio
Agustin, Victorio Nemenzo, Mabini Yarcia, Percy Zosimo, Angelito delos Reyes, Advincula Elmedulan,
Gorgonio Boloran, Alan Monin, Jessie Pacalingga and Michael Daclag.

All other claims are DISMISSED for lack of merit.

SO ORDERED.7

Their motion for reconsideration having been denied, petitioners filed a petition for certiorari with the Court of
Appeals, arguing that the NLRC acted with grave abuse of discretion in not finding Galaxie guilty of unfair labor
practice and of violating petitioners’ right to notice of closure, and in deleting the award of separation pay.

In the assailed decision,8 the Court of Appeals upheld the NLRC decision and accordingly denied petitioners’
petition for certiorari as it did their motion for reconsideration.

Hence, the present petition for review which raises the following issues:

1. Whether or not [Galaxie] is guilty of unfair labor practice in closing its business operations shortly after
petitioner union filed for certification election.

2. Whether or not petitioners are entitled to separation pay.

3. Whether or not the written notice posted by [Galaxie] on the company bulletin board sufficiently
complies with the notice requirement under Article 283 of the Labor Code.

Petitioners contend that the Court of Appeals erred in not finding that Galaxie’s closure of business operations was
motivated not by serious business losses but by their anti-union stance.

It is settled that this Court is not a trier of facts, a rule which applies with greater force in labor cases where the
findings of fact of the NLRC are accorded respect and even finality, as long as they are supported by substantial
evidence from which an independent evaluation of the facts may be made.9 In this case, the Labor Arbiter, the
NLRC, and the Court of Appeals were unanimous in ruling that Galaxie’s closure or cessation of business
operations was due to serious business losses or financial reverses, and not because of any alleged anti-union
position. This Court finds no reason to modify such finding.

In any event, petitioners contend that Galaxie did not serve written notices of the closure of business operations
upon its employees, it having merely posted a notice on the company bulletin board. Hence, petitioners conclude,
following the doctrine in Serrano v. National Labor Relations Commission,10 Galaxie should be liable for backwages
from the date of dismissal until finality of the decision in the case.
Labor II – 1
Further, petitioners contend that the appellate court’s upholding of the deletion by the NLRC of separation pay is
contrary to the ruling in Banco Filipino Savings and Mortgage Bank v. National Labor Relations Commission 11 which
held that separation pay is proper in cases where closure or cessation of business operations is due to serious
business losses or financial reverses.

Indeed, Galaxie’s documentary evidence shows that it had been experiencing serious financial losses at the time it
closed business operations. As aptly found by the Court of Appeals:

The NLRC’s finding on the legality of the closure should be upheld for it is supported by substantial evidence
consisting of the audited financial statements showing that Galaxie continuously incurred losses from 1997
up to mid-1999, to wit: P65,753,480.65 in 1997, P48,429,785.89 in 1998, and P13,204,389.97 in 1999; and
of the various demand notices of payments from creditor banks. Besides, the petitioners had not presented
evidence to the contrary; nor did they establish that the closure was motivated by Galaxie’s anti-union
stance. True, the union was seeking the holding of a certification election at the time that Galaxie closed its
business operation, but that, without more, was not sufficient to attribute anti-unionism against
Galaxie. (Underscoring supplied)

Upon the other hand, petitioners failed to present concrete evidence supporting their claim of unfair labor practice.
Unfair labor practice refers to acts that violate the workers’ right to organize,12 and are defined in Articles 248 and
261 of the Labor Code. The prohibited acts relate to the workers’ right to self-organization and to the observance of
Collective Bargaining Agreement without which relation the acts, no matter how unfair, are not deemed unfair labor
practices.13

Respecting petitioners’ claim for separation pay, Article 283 of the Labor Code provides:

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

In North Davao Mining Corporation v. National Labor Relations Commission,14 this Court held that Article 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, the closure then is
due to serious business losses, the Labor Code does not impose any obligation upon the employer to pay
separation benefits.15

Explaining the policy distinction in Article 283 of the Labor Code, this Court, in Cama v. Joni’s Food Services, Inc.,
declared:16

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

Labor II – 1
 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. x x x (Emphasis supplied)

The denial of petitioners’ claim for separation pay was thus in order.

Finally, with regard to the notice requirement, the Labor Arbiter found, and it was upheld by the NLRC and the Court
of Appeals, that the written notice of closure or cessation of Galaxie’s business operations was posted on the
company bulletin board one month prior to its effectivity. The mere posting on the company bulletin board does
not, however, meet the requirement under Article 283 of "serving a written notice on the workers." The
purpose of the written notice is to inform the employees of the specific date of termination or closure of
business operations, and must be served upon them at least one month before the date of effectivity to give
them sufficient time to make the necessary arrangements.17 In order to meet the foregoing purpose, service
of the written notice must be made individually upon each and every employee of the company.

Nevertheless, the validity of termination of services can exist independently of the procedural infirmity in the
dismissal. In Agabon v. National Labor Relations Commission,18 the Court deemed it best to revisit the doctrine
in Serrano,19 which was cited by petitioners, in relation to Wenphil Corp. v. National Labor Relations
Commission.20 After analyzing the consequences of the divergent doctrines on employment termination, the Court
held that in cases involving dismissals for cause, but without observance of statutory due process, the better rule is
to abandon the Serrano doctrine and to follow Wenphil by declaring that the dismissal was for cause but imposing
sanctions on the employer. By so doing, dispensing justice not just to employees but to employers as well is
achieved.21

In Business Services of the Future Today, Inc. v. Court of Appeals,22 which reiterated the ruling in Agabon v.
National Labor Relations Commission,23 this Court held that where the dismissal is for an authorized cause, the lack
of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer
should indemnify the employee, in the form of nominal damages, for the violation of his right to statutory due
process.

Ultimately, however, the amount of damages to be awarded the employee is addressed to the sound discretion of
the Court, taking into account the relevant circumstances.24

Under the facts and circumstances attendant to the case, this Court finds the amount of P20,000 in nominal
damages sufficient to vindicate each petitioner’s right to due process.

WHEREFORE, the assailed Decision dated March 26, 2004 and Resolution dated October 19, 2004 issued by the
Court of Appeals in CA-G.R. SP No. 68669 are AFFIRMED with the MODIFICATION that respondent Galaxie Steel
Corporation is ORDERED to PAY each of the individual petitioners the amount of P20,000.00 as nominal damages
for non-compliance with statutory due process.

Labor II – 1
30.)

BECTON DICKINSON PHILS., INC. and   G.R. Nos. 159969 & 160116
WILFREDO JOAQUIN ,
 
Petitioners,
 
 
Present:
 
 
 
PANGANIBAN, J., Chairman
- versus -
SANDOVAL-GUTIERREZ,
 
CORONA,
 
CARPIO MORALES, and
 

GARCIA, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, HON. LABOR ARBITER
 
EDGARDO M. MADRIAGA and REINERIO
Z. ESMAQUEL ,
 
Respondents.
 

Promulgated:

November 15, 2005

x-----------------------------------------------------------------------------------x

DECISION

GARCIA, J.:

Before the Court are these consolidated identical petitions for review on certiorari to reverse and set aside the same
issuances of the Court of Appeals (CA) in CA-G.R. SP No. 74424, to wit:

Labor II – 1
 a)      Decision [1] dated May 16, 2003, affirming an earlier decision of

the National Labor Relations Commission [NLRC] which dismissed petitioners'

appeal thereto from an adverse decision of the Labor Arbiter on account of

petitioners' failure to comply with NLRC Resolution No. 01-02 amending NLRC

Rules of Procedure and for being devoid of merit; and

b)      Resolution [2] dated September 5, 2003 , denying petitioners' motion for

reconsideration.

Petitioner Becton Dickinson Philippines, Inc. (Becton, Phils., for brevity), is a domestic corporation engaged in
the business of importation, warehousing, exportation, manufacture, assembly, sale at wholesale, and promotion of
health care products needed by hospitals, doctors, laboratories, and pharmaceutical companies. The company is a
wholly-owned subsidiary of Becton Dickinson Worldwide, Inc., U.S.A. based in New Jersey, United States of America
(U.S.A.) and with operations in the Asia Pacific Region under the charge of Becton Dickinson Asia Pacific (Becton,
Asia, for short), which is based in Singapore. On the other hand, petitioner Wilfredo Joaquin (Joaquin, hereafter),
was formerly the Country Manager of Becton, Phils. when herein private respondent Reinerio Z. Esmaquel filed
On October 24, 2001 before the Labor Arbiter of the National Capital Region (South Sector) a single
complaint for  'Illegal dismissal and underpayment of separation and retirement benefits with actual, moral and
exemplary damages and attorney's fees and payment of backwages from time of termination until final
judgment , [3] therein naming both petitioners as respondents.

In a Decision dated March 26, 2002, [4] Labor Arbiter Edgardo M. Madriaga found Becton, Phils. and Joaquin to
have acted jointly and in concert in terminating Esmaquel's employment and declared the latter's dismissal illegal,
but held Becton, Phils. solely liable for payment of backwages, separation pay and retirement benefit differential,
moral and exemplary damages and attorney's fees.

This notwithstanding, Joaquin nevertheless joined Becton, Phils. in assailing the Labor Arbiter's decision by way of
appeal [5] to the National Labor Relations Commission (NLRC).

Upon dismissal of their appeal by the NLRC per Decision dated August 8, 2002 [6] and the denial of their motion for
reconsideration per Resolution dated September 30, 2002, [7] Becton, Phils. and Joaquin jointly filed with the Court
of Appeals a petition for certiorari with application for temporary restraining order and/or preliminary
injunction [8] under Rule 65 of the Rules of Court, which petition was eventually dismissed by the appellate court
per Decision dated May 16, 2003. Petitioners Becton, Phils. and Joaquin jointly filed a motion for
reconsideration. [9] On September 12, 2003, petitioners, through counsel, received a copy of the appellate
court's Resolution dated September 5, 2003, denying their motion for reconsideration.

Presently, however, Joaquin is no longer the Country Manager of Becton, Phils. and he already resides in the U.S.A.
once again. In view of the need to have his verification on his petition and certification against non-forum shopping
notarized and authenticated with the Philippine Consulate in the U.S.A., petitioner

Labor II – 1
Joaquin separately filed via  registered mail on September 29, 2003 a Motion for Extension of Time to File a
Petition for Review  dated September 27, 2003, [10] praying for an extension of 15 days or until October 11, 2003,
within which to file his petition for review on certiorari, the original copy of which motion the Court actually received
on October 7, 2001 and his petition thereafter docketed as' G.R. No. 159969 .

Also, on September 29, 2003 (the Monday after the 15-day reglementary period which fell on a Saturday)
petitioner Becton, Phils. separately filed via  registered mail its own petition for review which, upon actual receipt
by this Court on October 16, 2003, was docketed as G.R. No. 160116.

As earlier stated, both petitions assail and seek the annulment of the same decision and resolution of the Court of
Appeals (CA) in CA-G.R. SP No. 74424.

On January 26, 2004, the Court resolved to consolidate [11] the two (2) petitions upon petitioners'
motion [12] therefor. Considering the arguments raised in the two petitions, respondent's comment, and petitioners'
reply, the Court resolved to give due course thereto. And, with the filing of the parties' respective memoranda, the
case is now ripe for final determination.

The facts as culled from the voluminous records before us, are as follows:

In 1989, Becton, Phils. had two (2) main divisions, namely: (a) the Medical Division; and (b) the Diagnostics
Division. Jesus Fargas headed the Medical Division, while the position of head of the Diagnostics Division was
vacant. Also vacant was the position of Country Manager of Becton, Phils.

On September 12, 1989, private respondent Reinerio Z. Esmaquel started his stint with Becton, Phils. as
Director of Sales and Marketing of the Diagnostics Division. He held this position until March 1998.

As Sales and Marketing Director of the company's Diagnostics Division, respondent reported to Becton, Asia's  Vice
President of Diagnostics Sector. He was in charge of the overall supervision of twenty-three (23) employees working
under the sales and marketing organization. He was responsible for the attainment of sales and profit targets as
well as the long term growth and development of the diagnostic business of Becton, Phils. He reviewed and
approved the company's country marketing plans and budget before submission to Becton, Asia. He oversaw the
implementation of marketing plans through the sales and marketing managers. He represented the company in the
meeting of the Southeast Asia Steering Committee and Asia Pacific Supply Chain Management Committee of the
different affiliates of Becton Dickinson Worldwide, Inc. in the Asia-Pacific Region.

For his commendable performance as Sales and Marketing Director, respondent received numerous citations and
awards, the most notable of which was the President's Club Award which he received in 1993 with the distinction
that he was the only recipient of this award in Becton's Asia Pacific Region.

In March, 1998, Jesus Fargas was promoted to the position of Country Manager for Becton, Phils. Respondent, on
the other hand, was appointed Business Director thereof, reporting, this time, to the Country Manager instead of
the Vice President of Diagnostics Sector of Becton, Asia. Respondent was responsible for sales and marketing of
Infectious Disease Diagnostic, Immunocytometry System, and Instrument Service for the Asia Pacific Region. He
held this position up to December, 1999.

As Business Director, respondent exceeded the sales target given him by the Becton, Phils. for fiscal year 1999 and
for which the Company gave his team free trip incentive to Europe. In 1999, respondent also received a Business
Excellence Award from Becton, Phils.
Labor II – 1
In January, 2000, Becton, Phils. reorganized under the concept of 'Go To Market. For purposes of selling its
products, Becton, Phils. had organized two (2) divisions, namely, the Sales Division and the Marketing Division, and
designated respondent as the Director of Sales. As such, respondent was responsible for the whole sales force for
all products of the company. The Marketing Division, on the other hand, was placed under the Office of the Country
Manager and the same was in charge of the preparation of marketing plans, including advertising and promotional
programs and in booking orders/sales to distributors of Becton, Phils.

Under the foregoing reorganization, the Sales Division was responsible for in-market sales or the sale of all the
products of the company to the distributors. The distributors who buy the products at wholesale, in turn, are the
ones selling the products to the end users. The company is, however, generally responsible for the sale promotions
of the company's products to the end users.

Consistent with his work performance, respondent achieved the sales target assigned to him, for which
reason, Becton, Phils. awarded his team free trip to the U.S.A.

Eventually, respondent was also appointed one of the members of the Becton Dickinson (BD) Philippines Leadership
Team, a group within Becton, Phils., which was responsible for the formulation of policies and rules of the company.

In November, 2000, pursuant to its established policies and guidelines for terminating employees, Becton,
Phils. retrenched nine (9) employees, giving them separation benefits in accordance with such guidelines. Its very
own Country Manager, Jesus Fargas, was among those whose services were terminated. Accordingly, each of them
received separation benefits computed as follows:

    Adjusted        

Monthly No. of Years of

SEPARATION PAY = x 3 X
Salary Service
 

where,
Adjusted    
   
Monthly Monthly
= X 13/12
Salary Salary
 
 

In addition thereto, the nine (9) terminated employees were also paid retirement benefits under the company's
Retirement Plan, computed as follows:
 

 
           

RETIREMENT = Monthly x 1.5 X No. of Years of

BENEFITS Salary Service

Labor II – 1
Thereafter, each of the nine (9) terminated employees executed separate Release and Quitclaim.

After Country Manager Jesus Fargas left the company, respondent was considered for said position. Pending the
appointment of a Country Manager, Becton, Asia  created a 'Self-Managed Team to run the day-to-day operations of
the company. The 'Self-Managed Team was composed of seven (7) members consisting of four (4) Filipinos and
three (3) foreigners. Respondent was named one of the four (4) Filipino members of the said team.

On May 16, 2001, Becton, Asia announced the appointment of petitioner Wilfredo Joaquin, a former Filipino
citizen who later acquired American citizenship, as the new Country Manager of Becton, Phils.

Being a stranger to the company's operations, as well as to the customers of Becton, Phils., Joaquin sought
respondent's assistance to address serious problems of the company, and to orient him in the mechanics of the
company's sales and marketing efforts in the Philippines.

Then, on that fateful day of July 10, 2001 or barely two (2) months from Joaquin's assumption of his
position as Country Manager, Becton, Phils. served upon respondent a notice of termination [13] of
employment effective August 10, 2001, on the ground that his position has been declared redundant.
In full, the notice reads:

July 10, 2001

To : R. Z. Esmaquel
From : Z. L. del Mundo
Dear Rene
For the past weeks, the BD Philippines Leadership Team has been discussing the
roles of each function within the BD Philippines Organisation.
With the move toward building strong and empowered teams and organizations due
to business exigencies, the time has come to review the role and services being
provided by each team member.
It is unfortunate that your position has been made redundant due to this
restructuring. We therefore regret to advise you of your termination on the ground
of redundancy effective August 10, 2001. Please return all company properties on
or before July 16, 2001.
We are determined to do our best to assist you by providing the necessary support.
Please refer to the attachment for the details of your payout. We also wish to
remind you that if you have any stock options, kindly exercise them within 90 days
of your termination date from the company.
We thank you for your service to the company. Do let us know if you have any
other concerns as we are most willing to assist in any way that we can.
Yours sincerely,
Becton Dickinson Philippines, Inc.
By:
Zenaida del Mundo (Sgd.)
Becton, Phils. offered to pay separation benefits to respondent computed as follows:
 
Labor II – 1
  
           

SEPARATION = Monthly x 1.38 x No. of Years of

Salary Service
PAY
 

plus retirement pay computed as follows:

 
           

RETIREMENT = Monthly x .75 x No. of Years of

BENEFITS Salary Service

Respondent objected to his termination because, as member of the BD Philippines Leadership Team, he was not
aware of any meeting or discussion of the team about the roles of his position in the organization. The roles of his
position/function in the company have never been placed in the agenda for meeting of the BD Philippines
Leadership Team. Respondent asked Joaquin why his position was declared redundant but Joaquin could not give
him any plausible reason except that the redundancy of his position was due to restructuring of the company
organization.

Respondent asked Joaquin if he had taken into consideration in declaring redundant his position, the
guidelines/rules for termination of employment as directed by Becton, Asia's  President, namely: (a) to retain the
best employee; (b) consider the performance of the employee for the last three (3) years; and (c) refrain from
taking decision based on individual salary. Joaquin failed to answer this question.

Respondent further protested when he was informed that the separation benefits to be paid to him was way below
those received by the nine (9) employees previously terminated. He demanded an equal treatment from the
company, considering that he rendered exemplary service thereto and that he is being terminated involuntarily.

This notwithstanding, he was terminated and required to sign a Release and Quitclaim, [14] otherwise,
his separation pay and retirement benefits will be withheld. Respondent found no other alternative but to give in,
and reluctantly signed the document.

On September 19, 2001, respondent, through counsel, sent Becton, Phils. a letter [15] protesting his termination
from service and/or illegal dismissal and demanded full payment of his separation pay and retirement benefits.

In its letter dated September 26, 2001, [16] counsel of Becton, Phils. rejected respondent's claim, explaining that he
had been given his full separation pay and retirement benefits (net of outstanding retirement loan and 50% share
in the car loan) in addition to which, he was also given a laptop computer, a Nokia 8850 cellular phone, free of
charge, and that he had already signed a Release and Quitclaim.

Aggrieved, respondent filed on October 24, 2001 a complaint against Becton, Phils. 'and Wilfredo
Joaquin with the Arbitration Branch of the NLRC for illegal dismissal, underpayment of separation pay and
retirement benefits, actual, moral, and exemplary damages, and attorney's fees.

On March 26, 2002, Labor Arbiter Edgardo M. Madriaga rendered a decision, dispositively reading as follows:

Labor II – 1
 WHEREFORE, judgment is hereby rendered:

1. The dismissal of complainant is declared illegal;

2. Respondent company is ordered to pay complainant Esmaquel:

a) Backwages of P197,525.00 per month reckoned from August 11,

2001 until actually paid;

b) Separation pay differential of P4,148,024.76 with legal interest from

date of judgment until actually fully paid;

c) Retirement benefit differential of P1,765,873.50 with legal interest

from date of this judgment until actually paid;

d) Moral damages of P300,000.00.

e) Exemplary damages of P300,000.00.

f) Attorney's fees in an amount equivalent to 10% of the total of all

the foregoing amounts.

SO ORDERED.

Therefrom, petitioners Becton, Phils. and Joaquin jointly appealed to the NLRC which, in a decision dated August 8,
2002, [17] affirmed that of the Labor Arbiter, to wit:
 

WHEREFORE, for failure to comply with the NLRC Resolution 01-02 amending

the NLRC Rules of Procedure, and for being devoid of merit, the appeal is

hereby dismissed.

SO ORDERED.

With their motion for reconsideration having been denied by the NLRC in its Resolution of September 30,
2002, [18] petitioners Becton, Phils. and Joaquin jointly went to the Court of Appeals (CA) via  a petition
for certiorari  under Rule 65 of the Rules of Court, whereat their recourse was docketed as CA-G.R. SP No. 74434.

Labor II – 1
As stated at the threshold hereof, the Court of Appeals, in a Decision dated May 16, 2003, dismissed petitioners'
recourse thereto and affirmed the assailed NLRC decision and resolution, thus:

WHEREFORE, in the light of the foregoing, the petition for certiorari

is DISMISSED and the assailed Decision and Resolution of the public

respondent NLRC are AFFIRMED.

The Urgent Motion (for Issuance of Preliminary Injunction) being merely

adjunct to the main suit, the same must pro tanto be DENIED.

SO ORDERED.

Their motion for reconsideration having been denied by the appellate court in its Resolution dated September 5,
2003, Becton, Phils. and Joaquin, this time separately, filed with this Court their respective petitions for review
on certiorari  under Rule 45 of the Rules of Court.  Eventually, the two petitions were consolidated per this Court's
minute Resolution [19] of 26 January 2004.
As we see it, the consolidated petitions raise two main issues: procedural and substantive.

The procedural issue: whether or not the Court of Appeals erred in not finding grave abuse of discretion on
the part of the NLRC when the latter dismissed petitioners' appeal from the Labor Arbiter's decision for
petitioners' failure to comply with NLRC Resolution 01-02 (Series of 2002) due to lack of a certification of non-
forum shopping.

The substantive issue: whether or not the Court of Appeals erred in not finding grave abuse of
discretion on the part of the NLRC when the latter dismissed the same appeal on the additional
ground of 'being devoid of merit.

We DENY.

The Court shall first address the procedural issue.

NLRC Resolution No. 01-02 (Series of 2002), amending the NLRC Rules of Procedure, provides:

SECTION 4. REQUISITIES FOR PERFECTION OF APPEAL. a) The Appeal shall be filed within the
reglementary period as provided in Section 1 of this Rule; shall be verified by appellant himself in
accordance with Section 4, Rule 7 of the Rules of Court, with proof of payment of the required appeal
fee and the posting of a cash or surety bond as provided in Section 6 of this Rule; shall be
accompanied by memorandum of appeal in three (3) legibly typewritten copies which shall state the
grounds relied upon and the arguments in support thereof, the relief prayed for, and a statement of
the date when the appellant received the appealed decision, resolution or order and a certification
of non-forum shopping with proof of service on the other party of such appeal. A mere notice of
appeal without complying with the other requisites aforestated shall not stop the running of the
period for perfecting an appeal. (Emphasis supplied).

Labor II – 1
The NLRC dismissed petitioners' appeal from the Labor Arbiter's decision for violation of the foregoing rule due
to lack of a certification of non-forum shopping. The Court of Appeals rejected petitioners' plea for the liberal
application of the rules in their case, where admittedly, petitioners filed their certification of non-forum
shopping twenty-one (21) days late. Partly says the appellate court in its assailed decision of May 16, 2003:

The certificate of non-forum shopping as provided [in the aforequoted provision of NLRC Resolution
No. 01-02] is mandatory and should accompany pleadings filed before the NLRC. Its language is very
clear and needs no further interpretation, to wit: xxx.

xxx xxx xxx

The perfection of an appeal in the manner and within the period prescribed by law is not only
mandatory but jurisdictional upon the court a quo, and the failure to perfect that appeal renders its
judgment final and executory. A fundamental precept is that the reglementary periods under the
Rules are to be strictly observed for being considered indispensable interdictions against needless
delays and an orderly discharge of judicial business. The strict compliance with such periods has
more than once been held to be imperative, particularly and most significantly in respect to
perfection of appeals. The finality of a judgment becomes a fact upon the lapse of the reglementary
period to appeal if no appeal is perfected, and the court loses all jurisdiction over the case, and it
becomes the ministerial duty of the court concerned to order execution of the judgment. After the
judgment has become final and executory, vested rights are acquired by the winning party. Just as
the losing party has the right to file an appeal within the prescribed period, so also the winning party
has the correlative right to enjoy the finality of the resolution of the case.

The failure of the petitioners to comply with the aforementioned NLRC Resolution is fatal to their
cause for their non-compliance with the requirement relative to the filing of certificate of non-forum
shopping did not toll the running of the period for perfecting their appeal. Perfection of appeal on
time is mandatory and jurisdictional. Failure to do so makes the March 26, 2002 Decision of the
Labor Arbiter final and executory. (Words in bracket added).

In this recourse, petitioners put emphasis on the supposed basis to justify their assertion of liberal application
of the rules, namely, to avoid miscarriage of substantial justice, allegedly on account of NLRC's total disregard
of the evidence material to or decisive of the controversy. On this score, petitioners presently fault the Court
of Appeals for not finding grave abuse of discretion on the part of the Commission.

It is relevant to note that petitioners are aware of the fact that compliance with the requisites for perfecting an
appeal is the general rule, and non-compliance therewith is the exception. Petitioners, however, insist that
their case falls within the exception.

In resolving this issue, it may well be stressed that the right to appeal is not a natural right nor is it part of due
process, for it is merely a statutory privilege that must be exercised in the manner and according to
procedures laid down by law. [20] Petitioners cannot insist, as there is no duty on the part of the court or the
NLRC for that matter, to take cognizance of an appeal which has not been perfected in accordance with the
rules of procedure laid down therefor. It is only in the exercise of courts' sound judicial discretion and in the
interest of substantial justice, that this Court may suspend the rules should it find cogent reasons for doing so.

Crucial to the resolution of the procedural issue of whether or not the Court should now suspend the rules is
the resolution of the next issue which pertains to the substantive aspect of the case. Should there be grave
abuse of discretion on the part of the appellate court in resolving the factual and legal issues raised before it
as regards the alleged illegal dismissal of herein respondent, then the Court shall have a cogent reason to
suspend the rules.

Labor II – 1
This brings us to the substantive aspect of the case.

The Court will first focus on petitioners' basic submission that respondent was validly and legally
terminated as Sales Manager on the ground of redundancy, and finally on their contention that
respondent's claim is barred by the Release and Quitclaim signed by him.

On the matter of redundancy, the Labor Arbiter ruled, and both the NLRC and the Court of Appeals
unanimously agreed therewith, that:

The record supports the finding that the Company and Joaquin disregarded totally the
Company's guidelines in declaring [respondent's ] position redundant.
The principal reason why [respondent's ] position was declared redundant is the fact
that he was the highest paid employee with a monthly salary of P197,525.00. The
Company's main purpose in terminating [respondent] was to cut down expenses and it
did so by dismissing him in one fell swoop, camouflaging its malice by using the ground
of redundancy. Thus was violated the Company rule that the decision to terminate must
not be based on salary. The Company certainly could not find fault with [respondent's ]
performance. In 1999 his work performance was 'outstanding. In 2000 his work
performance was 'very good. For the FY 2000, [respondent] achieved 104% sales
performance. Hence, there were violations of the Company rules to retain the best
employee; to consider the performance of the employee for the last three years;
protect the best people; and remove those who least contribute.
There is no clear proof that [respondent's ] services are in excess of the
Company's reasonable demands and requirements; and that there is no other
alternative available to the Company except to dismiss [respondent]. The
superfluity of [respondent's ] position has not been established. There has
been no previous overhiring of employees. On the contrary, the Company had
already terminated nine (9) employees. There is no proof of decreased volume
of business. Indeed, [respondent] had overshot the sales target ' he achieved
104% sales performance. Neither is there proof that the Company had
dropped a product line or service.
The Company does have standards or criteria in choosing who to dismiss, but it violated
them. On the other hand, it had hewed closely to these standards when it terminated
the nine (9) other employees.
The records supports the finding that the Company treated [respondent] in a way
different from its treatment of aforesaid nine (9) employees not only in the matter of
termination but also in the matter of separation pay and retirement
benefits. [21] (Emphasis' and words in bracket ours)
 

As may be noted from the foregoing excerpt from the Labor Arbiter's decision, the substantive issue of validity
of respondent's termination of employment on the alleged ground of redundancy is basically factual in nature.
There's no question that Rule 45 of the Rules of Court provides that only questions of law may be raised in a
petition for review on certiorari, the reason being that this Court is not a trier of facts.  It is not for this Court
to reexamine and reevaluate the evidence on record. 

As held by this Court in the very recent case of Dusit Hotel Nikko vs. National Union of Workers in Hotel: [22]

the factual findings of the NLRC, as affirmed by the CA, are accorded high respect and
finality unless the factual findings and conclusions of the Labor Arbiter clash with those
of the NLRC and the CA, in which case, the Court will have to review the records and

Labor II – 1
 the arguments of the parties to resolve the factual issues and render substantial justice
to the parties.
 
 

In Alfaro vs. Court of Appeals, [23] the Court, per Justice Artemio V. Panganiban, applied the same ruling, and
further explained the reasons therefor, to wit:

 
The Supreme Court is not a trier of facts, and this doctrine applies with greater force in
labor cases. Factual questions are for the labor tribunals to resolve. In this case, the
factual issues have already been determined by the labor arbiter and the National Labor
Relations Commission. Their findings were affirmed by the CA. Judicial review by this
Court does not extend to a reevaluation of the sufficiency of the evidence upon which
the proper labor tribunal has based its determination.
 
Indeed, factual findings of labor officials who are deemed to have acquired expertise in
matters within their respective jurisdictions are generally accorded not only respect, but
even finality, and are binding on the Supreme Court. Verily, their conclusions are
accorded great weight upon appeal, especially when supported by substantial evidence.
Consequently, the Supreme Court is not duty-bound to delve into the accuracy of their
factual findings, in the absence of a clear showing that the same were arbitrary and
bereft of any rational basis.
 

It bears stressing herein that the factual findings of the Labor Arbiter were, upon review, affirmed in toto  by
the NLRC, and thereafter, by the Court of Appeals. A heavy burden, as it were, rests upon petitioners to
convince the Court that it should take exception from such a settled rule.

Considering petitioners' vehement plea for the suspension of the rules pertaining to the perfection of appeal
despite the contrary practice thereto, the Court painstakingly reviewed the records of the case together with
the parties' pleadings. Unfortunately, even after thoroughly going over petitioners' pleadings, the Court finds
no cogent reason to take exception from this governing rule. Since the factual findings of the Labor Arbiter are
supported by substantial evidence, the Court upholds the factual conclusion that redundancy was not duly
established by evidence. Besides, this conclusion conforms with jurisprudence on the matter.

Redundancy is one of the authorized causes of dismissal, which, in the leading case of Wiltshire File Co., Inc.
vs. NLRC, [24] this Court had occasion to explain the nature of, in the following manner:

x x x redundancy in an employer's personnel force necessarily or even ordinarily refers

to duplication of work. That no other person was holding the same position that private
respondent held prior to the termination of his services, does not show that his position
had not become redundant. Indeed, in any well organized business enterprise, it would
be surprising to find duplication of work and two (2) or more people doing the work of
one person. We believe that redundancy, for purposes of 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, decrease in volume of
business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. (Emphasis supplied.)
[

Labor II – 1
Respondent duly questioned the validity of using the ground of redundancy as basis for his forced separation
from the company. On the other hand, however, aside from their plain allegation that respondent's 'position
has been made redundant due to restructuring [25], and that 'the Company was constrained to terminate the
services of complainant as a consequence of organizational changes which were necessitated by a decrease in
the volume of sales of the Company, [26] petitioners utterly failed to establish by substantial evidence that
indeed, respondent's position in the company became redundant due to concrete and real factors recognized
by law and relevant jurisprudence. Evidently cognizant of such neglect, petitioners attempted to correct the
situation by now attaching a photocopy of the Report of Independent Auditors Punongbayan & Araullo dated
October 10, 2001 as Annex 'C [27] to their petition before this Court to substantiate their allegations before
the Labor Arbiter. Unfortunately, this Court is not a trier of facts and evidence not presented during the trial
cannot be considered at all.
 
Besides, although the Court is mindful, and thus' held in Dole Philippines, Inc. vs. NLRC, [28] that the
characterization of an employee's services as no longer necessary or sustainable, and therefore, properly
terminable, is an exercise of business judgment on the part of the employer, and that the wisdom or
soundness of such characterization or decision is not subject to discretionary review, provided of course that
violation of law or arbitrary or malicious action is not shown, the Court in the above-cited case of Dusit Hotel
Nikko nevertheless emphasized that:

like other rights, there are limits thereto. The managerial prerogative to transfer
personnel must be exercised without grave abuse of discretion, bearing in mind
the basic elements of justice and fair play. Having the right should not be confused with
the manner in which that right is exercised.  Thus, it cannot be used as a subterfuge by
the employer to rid himself of an undesirable worker. (Emphasis ours.)

Along the same vein is this Court's ruling in Metrolab Industries, Inc. vs. Roldan-Confesor, [29] to wit:

the exercise of management prerogatives was never considered boundless. Thus,

in Cruz vs. Medina  (177 SCRA 565 [1989]), it was held that management's prerogative
must be without abuse of discretion
All these point to the conclusion that the exercise of managerial prerogatives is not
unlimited. It is circumscribed by limitations found in law, a collective bargaining
agreement, or the general principles of fair play and justice (University of Sto. Tomas
v. NLRC, 190 SCRA 758 [1990]) (Emphasis ours).
 

We agree with respondent that when Becton, Asia laid down guidelines for terminating employees and
petitioner Becton, Phils. applied these in previously laying off nine (9) of its employees, Becton,
Phils. committed grave abuse of discretion in not applying the same criteria in respondent's case. There is
reason and basis for the State, through the NLRC in this case, to intervene and reexamine the validity of
petitioner company's exercise of its managerial prerogatives in declaring a certain position redundant insofar
as in so doing, the rights of respondent to said position is jeopardized.

Moreover, even after a thorough review of the records of this case, the Court finds no valid and acceptable
explanation for the unequal treatment by petitioner Becton, Phils. in the manner of termination of the nine
(9) employees and that of respondent, and therefore agrees with the Labor Arbiter that such discriminatory
act is abhorrent to the basic principles of social justice and protection of labor, akin to a violation of the equal
protection clause enshrined in the Constitution.

Indeed, it smacks of incredulity to believe that a topnotch employee who has contributed much to the growth
of the company and for which the latter even reciprocated him with honors and awards, suddenly in a span of
less than two (2) months from the time a new company Country Manager assumed post, would wake up one
morning with a notice that his position is already superfluous and therefore he is no longer needed.

Labor II – 1
Petitioners also contend that respondent already signed a Release and Quitclaim which forthwith
bars any further claims against the company. The Labor Arbiter, however, ruled that:

[Respondent] is not on equal footing with the Company; he was in a precarious

financial position; he needed the money, to be given to him by the Company; so he
signed, otherwise his family would starve. [Respondent's ] signing of the Release and
Quitclaim as a condition for payment to him of the separation pay and 'Goodwill does
not bar him from seeking the full measure of his right or to demand benefits to which
he is legally entitled or to question the legality of his dismissal. (Words in bracket ours).

The rule on the matter is as follows:

The validity of quitclaims executed by laborers has long been recognized in this
jurisdiction. In Periquet vs. National Labor Relations Commission (186 SCRA 724
[1990]), this Court ruled that not all waivers and quitclaims are invalid as against public
policy. If the agreement was voluntarily entered into and represents a
reasonable settlement of the claims of the employee, it is binding on the parties
and may not later be disowned simply because of a change of mind. Such legitimate
waivers resulting from voluntary settlements of laborer's claims should be treated and
upheld as the law between the parties (Labor Congress of the Philippines vs. NLRC, 292
SCRA 469, 477 [1998]). However, when as in this case, the voluntariness of the
execution of the quitclaim or release is put into issue, then the claim of
employee may still be given due course (Talla vs. National Labor Relations
Commission, 175 SCRA 479, 480-481 [1989]). The law looks with disfavor upon
quitclaims and releases by employees pressured into signing the same by
unscrupulous employers minded to evade legal responsibilities (Labor Congress,
supra.). (Emphasis ours.) [30]
 

The factual and legal bases of the Labor Arbiter's ruling on the supposed Release and Quitclaim are well
established. We cannot subscribe to petitioners' reasoning that the foregoing ruling on the validity and binding
effect of releases and quitclaims apply only to rank-and-file workers, and find no application to respondent in this
case, who happens to be a highly intelligent man who once held the top sales position at petitioner company.
There is no nexus between intelligence, or even the position which the employee held in the company when it
concerns the pressure which the employer may exert upon the free will of the employee who is asked to sign a
release and quitclaim. A lowly employee or a sales manager, as in the present case, who is confronted with the
same dilemma of whether signing a release and quitclaim and accept what the company offers them, or refusing
to sign and walk out without receiving anything, may do succumb to the same pressure, being very well aware
that it is going to take quite a while before he can recover whatever he is entitled to, because it is only after a
protracted legal battle starting from the labor arbiter level, all the way to this Court, can he receive anything at
all. The Court understands that such a risk of not receiving anything whatsoever, coupled with the probability of
not immediately getting any gainful employment or means of livelihood in the meantime, constitutes enough
pressure upon anyone who is asked to sign a release and quitclaim in exchange of some amount of money which
may be way below what he may be entitled to based on company practice and policy or by law.

It may likewise be noted that what respondent received when he signed the Release and Quitclaim was less than
half of what he is entitled to under the circumstances, as correctly computed by the Labor Arbiter in his March
26, 2002 decision. This is another reason why the Court cannot rely upon such Release and Quitclaim to validly
bar respondent from thereafter claiming additional benefits from petitioner Becton, Phils.

Finding no merit in the substantive aspect of the present petitions, the Court has' no legal basis' to rule in
favor of liberal application of procedural rules in this case by suspending the same and allowing due course to
petitioners' appeal before the NLRC despite violation of NLRC Resolution No. 01-02 (Series of 2002) for lack of
a certification of non-forum shopping.

Labor II – 1
All told, the Court finds no reversible error with the assailed decision and resolution of the Court of Appeals. As
it is, no grave abuse of discretion may be imputed by said court upon the NLRC, which merely abides by its
own rules of procedure.

Worse, even if the aforesaid procedural and technical infirmities were to be ignored, the Court finds no cogent
reason to depart from, much more nullify and set aside, the challenged decision and resolution of the Court of
Appeals because definitely, no grave abuse of discretion could be imputed to the NLRC in affirming the
decision of the Labor Arbiter on its merits.

WHEREFORE, the instant petitions are DENIED and the assailed Decision and Resolution of the Court of
Appeals' AFFIRMED.

Labor II – 1
31.) G.R. No. 147002. April 15, 2005

PHILIPPINE TELEGRAPH & TELEPHONE CORPORATION and DELIA OFICIAL, Petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, AGNES BAYAO and MILDRED CASTILLO, Respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure from the
Decision of the Court of Appeals (CA) in CA-G.R. SP No. 57551, affirming the decision of the National Labor
1 

Relations Commission (NLRC), and the Resolution dated February 2, 2001 denying the motion for reconsideration
thereof.

The antecedents are as follows:

Agnes Bayao and Mildred Castillo were hired by the Philippine Telegraph & Telephone Corporation (PT&T) in
November 1991 and August 1995, respectively, both as account executives stationed in Baguio City.

Both Bayao and Castillo received a Memorandum dated May 21, 1998 coming from Ma. Elenita V. Del Rosario,
2 

Vice-President of the Commercial Operations Group (COG) of PT&T, inviting them to consider a two to three-month
assignment to the provinces of Rizal and Laguna in view of PT&T’s expansion in the aforesaid area. Bayao and
Castillo refused the offer, on the ground that the transfer would entail additional expense on their part and there
were no clear guidelines and procedures for its implementation.

Meanwhile, the expansion project of PT&T failed to materialize due to lack of capital. PT&T realized that it needed to
undertake measures against losses to prevent the company from going bankrupt, particularly by reducing its
workforce from 2,500 to 900 employees. Pursuant thereto, it implemented a Voluntary Staff Reduction Program
(VSRP) which was availed of by 478 employees. Failing to attain its target, PT&T implemented an extended VSRP,
but still not enough employees availed of the program.

PT&T decided to implement a temporary retrenchment of some employees dubbed as Temporary Staff Reduction
Program (TSRP) lasting for not more than five and a half (5½) months, to commence from September 1, 1998 to
February 15, 1999. Pursuant to the program, affected employees would receive financial assistance equivalent to
15 days salary and a loan equivalent to two months salary chargeable to the account of the employee concerned.

Bayao and Castillo received a Letter from Del Rosario, dated August 21, 1998, informing them that the cumulative
3 

net losses of PT&T for the last four years had reached ₱293.4 million and that they were among the employees
affected by the TSRP.

When Bayao and Castillo reported for work on September 2, 1998, they were informed that the position of account
executive no longer existed; in its stead, the positions of Service Account Representatives (SAR) and Service
Account Specialists (SAS) were created per COG Bulletin Order No. 98-014 effective August 21, 1998, and had
already been filled up. The said COG Bulletin Order No. 98-014 reads:

As part of the Organization Streamlining of the OM Efficiency Moves Program: For a more Responsive and
Responsible Organization Structure. COG announces the new Service Account Representatives (SAR), and
Service Account Specialists (SAS). This will collapse and replace the Account Executive positions outside of
NCR, effective immediately. Account Executive functions and positions in NCR will be retained.

In view of new responsibilities entrusted to the COG, such as full-blown account management functions which
includes collections for agencies, Dials Plus and Data subscribers, as well as PT&T COG’s new role as PWI’s
distributor of pager products and services, the need to re-define positions and responsibilities is imperative.

Labor II – 1
Please see attached for the list of SARs and SASs and their areas of coverage.

Responsibilities

The SAR and SAS positions, are created based on the responsibilities and criteria below, and will replace and
enhance former AE positions in the provinces:

1. SAR – Responsible for account management and collection from agencies, DIALS Plus and data subscribers;
assists SAS from time to time with PWI documentation and other activities

* Maintains monthly minimum of ₱80,000 (net of agency commission) and 10 equivalent accounts, where a Metro
agency or Dials Plus subscriber = 1 account, while a MTPCO account (due to distance) = 2 accounts.

* The SAR reports directly to the District or Zone head in his/her area.

*Note: In Cebu which has several data subscribers, collector/s under Credit and Collection will be maintained.

2. SAS – Responsible for contracting agencies, payphone site location, Dials Plus subscribers and management of
Direct Sales agents (DSA) which will comprise the sales force of PWI pagers and other services. 4

That same day, September 2, 1998, Bayao and Castillo promptly filed a complaint for illegal dismissal with the
NLRC, Regional Arbitration Branch, Cordillera Administrative Region, against PT&T and Delia Oficial in her capacity
as manager for Baguio City.

In the interim, Del Rosario sent a Letter dated October 26, 1998 to both Bayao and Castillo in this language:

In our previous written communications, you have been informed that you are a part of the Temporary Staff
Reduction Program (TSRP) being implemented by management for a period of five and a half (5½) months in order
to help ease the severe financial problems of the company.

You are well aware that the certified bargaining representative of the rank-and-file employees, PT&T Progressive
Workers Union-NAFLU-KMU (the Union) in the Notice of Strike filed before the National Conciliation and Mediation
Board (NCMB), raised as one of the grounds thereof the TSRP implemented by management.

The notice of strike culminated in the signing of an agreement between the management and the Union wherein it
was agreed among others that the eighty (80) employees who would not be recalled will be paid the following:

"2. The grant of financial assistance equivalent to one and one half month inclusive of the one half month pay
previously offered by management to the 80 employees who will be separated;

"3. The payment of separation pay for every year of service to the 80 employees to be identified by the union, and
shall be paid under the same terms and conditions as provided under the extended VSRP."

While you are not part of the bargaining unit, management is extending to you the same separation package under
S.O. No. 98-15 and NCMB Agreement between management and the union dated 30 September 1998, provided we
receive a formal letter from you applying for the Staff Reduction Program package. Please submit said letter on or
before 15 November 1998. Payments shall be released only upon receipt of said letter.

Your separation from the company is effective on 31 August 1998. (Please see attached guidelines for details.)

It really pains us to separate you from the company but it is a necessary measure we have to take to ensure the
survival of the company. 5

Labor II – 1
On March 31, 1999, Labor Arbiter Monroe C. Tabingan rendered a Decision in favor of Bayao and Castillo, the
dispositive portion of which reads:

WHEREFORE, premises all duly considered, it is hereby found that the Complainants were constructively
dismissed. In view thereof, the Respondent is hereby ordered to:

1. Reinstate the said complainants to their former position without loss of seniority rights and benefits;

2. Pay their full backwages from the time of their dismissal to their actual reinstatement, or on payroll, with legal rate
of interest thereon until the same shall have been fully paid, computed as of even date at SIXTY THOUSAND NINE
HUNDRED PESOS (₱60,900.00) each;

3. Pay to each of the complainant the amount of TWENTY THOUSAND PESOS (₱20,000.00) as and by way of
exemplary damages;

4. Pay to each of the complainant the amount of SIX THOUSAND PESOS (₱6,000.00) as and by way of indemnity
for failure of the respondent to observe due process; and,

5. Pay an attorney’s fee equivalent to 10% of the total monetary award.

SO ORDERED. 6

PT&T and Oficial interposed their appeal to the NLRC. On October 12, 1999, the NLRC issued its
Resolution dismissing the appeal and affirmed the decision of the Labor Arbiter, deleting, however, the award of
7 

legal interest, exemplary damages, indemnity and attorney’s fees for lack of merit. PT&T and Oficial filed a motion
for partial reconsideration, but the same was denied. The matter was elevated to the CA by way of a petition
8 

for certiorari.

On July 31, 2000, the CA issued its Decision dismissing the petition and affirmed the findings of the NLRC. The CA
9 

declared that there was no valid ground for retrenchment, considering that when Bayao and Castillo returned, their
positions were already filled up; at the same time, PT&T did not inform its employees and the Department of Labor
and Employment (DOLE) of the scheduled retrenchment at least one month before its implementation. A motion for
reconsideration was filed, but the same was denied by the CA. 10

Hence this petition.

PT&T and Delia Oficial, now as petitioners, raise the following as errors:

A. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT REVIEWING THE
CORRUPTED FINDINGS OF THE NLRC AND THE LABOR ARBITER DECLARING HEREIN PRIVATE
RESPONDENTS TO HAVE BEEN ACTUALLY, EFFECTIVELY AND CONSTRUCTIVELY DISMISSED.

B. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT REVIEWING THE DEBASED
FINDINGS OF THE NLRC AND THE LABOR ARBITER DECLARING THE RETRENCHMENT PROGRAM
ILLEGAL.

C. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT THE THIRTY
(30) DAYS NOTICE TO THE DEPARTMENT OF LABOR AND EMPLOYMENT AND TO THE EMPLOYEES
AFFECTED IS ALSO REQUIRED EVEN IN A CASE OF TEMPORARY RETRENCHMENT.

D. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT DELETING THE AWARD FOR
BACKWAGES DESPITE ITS CLEAR PRONOUNCEMENT THAT RESPONDENTS WERE NOT ABLE TO PROVE
BAD FAITH ON THE PART OF PETITIONERS IN DISMISSING THEM FROM THE SERVICE. 11

Labor II – 1
The threshold issue to be resolved in the present recourse is whether or not the retrenchment program
implemented by petitioner PT&T is valid.

Retrenchment has been defined as the termination of employment initiated by the employer through no fault of the
employees and without prejudice to the latter, resorted 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. It is a management prerogative resorted to by an employer to avoid or minimize
12 

business losses which is consistently recognized by the Court. 13

Article 283 of the Labor Code lays down the conditions for its exercise, to wit:

Art. 283. Closure of establishment and reduction of personnel. ― The employer may also terminate the employment
of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the 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 one (1) month pay or to at least his 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.

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.14

Under the first requisite, it is imperative and incumbent on the part of the employer to sufficiently and convincingly
establish business reverses of the kind or in the amount that would justify retrenchment. To justify retrenchment,
15 

the employer must prove serious business losses, as not all business losses suffered by an employer would justify
retrenchment under the aforesaid Article 283. The loss referred to in the said provision cannot be of just any kind
16 

or amount, otherwise, a company could easily feign excuses to suit its whims and prejudices or to rid itself of
unwanted employees. As consistently held by this Court, to guard against abuse, any claim of actual or potential
17 

business losses must satisfy the following established standards, to wit; (a) the losses incurred are substantial and
not de minimis; (b) the losses are actual or reasonably imminent; (c) the retrenchment is reasonably necessary and
is likely to be effective in preventing the expected losses; and (d) the alleged losses, if already incurred, or the
expected imminent losses sought to be forestalled are proven by sufficient and convincing evidence. 18

The Court has previously ruled that financial statements audited by independent external auditors constitute the
normal method of proof of the profit and loss performance of a company. 19

In this case, to prove that the company incurred losses, the petitioners presented its audited financial statements for
the corporate fiscal years 1996 to 1998 and emphasized that, in the October 20, 1998 Audit Report prepared by
20 

SGV & Co., the auditing firm declared that petitioner PT&T incurred a substantial loss of about ₱558 million for the
fiscal year ending June 30, 1998, resulting to a total deficit of about ₱574 million as of the same date; and that
petitioner PT&T even negotiated with its creditors for the suspension of payments of its outstanding balances until
the completion of an acceptable restructuring plan. 21

Based on the financial statements submitted, petitioner PT&T suffered a net loss of ₱40,780,017 in 1995 and 22 

₱85,423,641 in 1996, posted a net income of ₱1,491,532 in 1997, and again suffered a net loss of ₱557,892,627 in
1998. The foregoing clearly indicates that the petitioner PT&T sufficiently complied with its burden to prove that it
23 

incurred substantial losses as to warrant the exercise of the extreme measure of retrenchment to prevent the
company from totally going under.

Labor II – 1
While an employer may have a valid ground for implementing a retrenchment program, it is not excused
from complying with the required written notice served both to the employee concerned and the DOLE at
least one month prior to the intended date of retrenchment. The purpose of this requirement is not only to give
24 

employees some time to prepare for the eventual loss of their jobs and their corresponding income, look for other
employment and ease the impact of the loss of their jobs but also to give the DOLE the opportunity to ascertain the
25 

verity of the alleged cause of termination.

26

In the case at bar, the memorandum of Del Rosario, the vice-president of the COG, to respondents Bayao
and Castillo informing the latter that they were included in the TSRP to be implemented effective September
1, 1998 was dated August 21, 1998. The said memorandum was received by Castillo on August 24, 1998 and
Bayao on August 26, 1998. The respondents had barely two weeks’ notice of the intended retrenchment
27 

program. Clearly then, the one-month notice rule was not complied with. At the same time, the petitioners
never showed that any notice of the retrenchment was sent to the DOLE.

The petitioners insist that the one-month notice requirement does not apply in this situation, as the
retrenchment involved was merely temporary and not permanent. They aver that this has been recognized by
this Court, and quote Sebuguero v. NLRC in this manner:
28 

Article 283 speaks of a permanent retrenchment as opposed to a temporary lay-off as is the case here. There is no
specific provision of law which treats of a temporary retrenchment or lay-off and provides for the requisites
in effecting it or a period or duration therefor. 29

The petitioners’ adherence to the above pronouncement of the Court is misplaced. The particular issue involved in
the said decision was the duration of the period of temporary lay-off, and not the compliance with the one month
notice requirement. Reading the entire paragraph of the quoted portion of the decision would readily show what it
was referring to, thus:

This provision, however, speaks of a permanent retrenchment as opposed to a temporary lay-off as is the case
here. There is no specific provision of law which treats of a temporary retrenchment or lay-off and provides for the
requisites in effecting it or a period or duration therefor. These employees cannot forever be temporarily laid-off. To
remedy this situation or fill the hiatus, Article 286 may be applied but only by analogy to set a specific period that
employees may remain temporarily laid-off or in floating status. Six months is the period set by law that the
operation of a business or undertaking may be suspended thereby suspending the employment of the employees
concerned. The temporary lay-off wherein the employees likewise cease to work should also not last longer than six
months. After six months, the employees should either be recalled to work or permanently retrenched
following the requirements of the law, and that failing to comply with this would be tantamount to dismissing the
employees and the employer would thus be liable for such dismissal. 30

Nowhere can it be found in Sebuguero that the one month notice may be dispensed with. On the contrary, the
Court, speaking through now Chief Justice Hilario G. Davide, Jr., emphasized the mandatory nature of the said
notice, to wit:

The requirement of notice to both the employees concerned and the Department of Labor and Employment (DOLE)
is mandatory and must be written and given at least one month before the intended date of retrenchment. In this
case, it is undisputed that the petitioners were given notice of the temporary lay-off. There is, however, no evidence
that any written notice to permanently retrench them was given at least one month prior to the date of the intended
retrenchment. The NLRC found that GTI conveyed to the petitioners the impossibility of recalling them due to the
continued unavailability of work. But what the law requires is a written notice to the employees concerned and that
requirement is mandatory. The notice must also be given at least one month in advance of the intended date of
retrenchment to enable the employees to look for other means of employment and therefore to ease the impact of
the loss of their jobs and the corresponding income. That they were already on temporary lay-off at the time notice
should have been given to them is not an excuse to forego the one-month written notice because by this time, their
lay-off is to become permanent and they were definitely losing their employment. 31

The Court further emphasized therein that –

Labor II – 1
There is also nothing in the records to prove that a written notice was ever given to the DOLE as required by law.
GTI's position paper, offer of exhibits, Comment to the Petition, and Memorandum in this case do not mention of any
such written notice. The law requires two notices ― one to the employee/s concerned and another to the DOLE ―
not just one. The notice to the DOLE is essential because the right to retrench is not an absolute prerogative of an
employer but is subject to the requirement of law that retrenchment be done to prevent losses. The DOLE is the
agency that will determine whether the planned retrenchment is justified and adequately supported by facts. 32

Interestingly enough, the evidence on record indicates that respondents Bayao and Castillo were not merely
temporarily laid-off. The October 26, 1998 Letter of Del Rosario addressed to the respondents clearly stated that the
latter were to be considered separated from the company effective August 31, 1998 and that they were each being
extended a separation package. In the said letter, Del Rosario even showed signs of consoling the respondents
33 

stating that: "It really pains us to separate you from the company but it is a necessary measure we have to take to
ensure the survival of the company." 34

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
35 

₱30,000.00. 36

Finally, since petitioner PT&T was able to establish that it incurred serious business losses, justifying the
retrenchment, the final requisite is the payment of separation pay. Pursuant to Section 283 of the Labor Code, as
amended, the retrenchment having been effected due to serious business losses, respondents Bayao and Castillo
are each entitled 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 LIGHT OF ALL THE FOREGOING, the petition is partially granted. The Decision of the Court of Appeals in CA-
G.R. SP No. 57551 is MODIFIED. The petitioners are ORDERED, jointly and severally, to pay to respondents
Agnes Bayao and Mildred Castillo (a) an amount equivalent to one-half (1/2) month of their respective pay for every
year of service, with the understanding that a fraction of at least six (6) months shall be considered one (1) whole
year, as separation pay; and (b) ₱30,000.00 by way of nominal damages. No costs.

Labor II – 1
32.) ORIENTAL PETROLEUM and G.R. No. 151818

MINERALS CORPORATION,

Petitioner,

Present:

PUNO, J.,

-versus- Chairman,

AUSTRIA-MARTINEZ,

CALLEJO, SR.,

TINGA, and

MARCIANO V. FUENTES, CHICO-NAZARIO, JJ.

ROGER B. BELO, REYNOLD

P. GACULA, ALBERTO P.

RODRIGUEZ, NESTOR L. MESINA, Promulgated:

MA. LOURDES P. BUENAVISTA,

and LUZVIMINDA M. DE CASTRO,

Respondents. October 14, 2005

x -------------------------------------------------------------------x

DECISION

TINGA, J.:

Labor II – 1
This Petition for Review on Certiorari [1] dated February 22, 2002 seeks a review of
the Decision [2] of the Court of Appeals' dated July 31, 2001 which annulled

and set aside the decision of the National Labor Relations Commission (NLRC) and reinstated the
decision of the labor arbiter, finding that the dismissal of respondents on account of
retrenchment was illegal and awarding the latter full backwages, separation pay, and attorney's
fees.

A brief factual background follows.

In separate letters [3] dated June 2, 1994, petitioner Oriental Petroleum and Minerals

Corporation, through its Senior Vice President for Operations and Administration, Apollo P.
Madrid, informed respondents Marciano V. Fuentes, Roger B. Belo, Reynold P. Gacula, Alberto P.
Rodriguez, Nestor L. Ledesma, Ma. Lourdes P. Buenavista and Luzviminda M. de Castro of its
retrenchment program as a consequence of which respondents would be terminated from
employment. Petitioner advised respondents that they would be getting separation pay
equivalent to one-half (1/2) month salary for every year of service in accordance with the
company's retirement plan. However, if respondents qualify for retirement or resignation
benefits under the retirement plan, they would receive the greater amount as separation
benefits.

The Department of Labor and Employment (DOLE) was served a copy of the report of
termination on June 6, 1994. [4]

In a letter [5] dated June 7, 1994, respondents sought clarification on the retrenchment package

being offered them. Petitioner replied, in a letter [6] dated June 13, 1994, that respondents
Mesina, Rodriguez, De Castro and Buenavista would be entitled to one (1) month gross salary
for every year of service, while respondents Fuentes, Gacula and Belo would receive one-half
(1/2) month gross salary for every year of service.

Finding this unacceptable, respondents requested that the following benefits be extended to
them: (a) two (2) months' separation pay (gross salary) on top of one (1) month retirement
fund for every year of service; (b) profit sharing; (c) one (1) month balance of the 1993
Christmas bonus; (d) two (2) months' 1994 mid-year bonus; (e) loyalty bonus for those who
have rendered fifteen (150 years of service amounting to about P10,000.00; (f) conversion to
cash of accrued vacation and sick leaves; (g) thirteenth (13th) month pay; and (h) I-care

Labor II – 1
coverage to continue up to the end of coverage in December 1994 since premiums have been
paid for in full and no refunds are given for early cancellation. [7]

Acting on the request, petitioner countered that respondents would be given the following
benefits: (1) loyalty bonus for those who have rendered at least 15 years of continuous service
amounting to P10,000.00; (2) conversion to cash of the accrued 1994 vacation and sick leave
credits; and (3) pro-rated 13th month pay.

Dissatisfied with petitioner's counter-offer, respondents filed on July 4, 1994 separate

complaints [8] for illegal retrenchment with prayer for the payment of backwages, actual
damages, moral and exemplary damages, and attorney's fees.

After due proceedings, the labor arbiter rendered a decision [9] dated June 29, 1995, finding the
retrenchment invalid as there was allegedly no sufficient basis therefor. The dispositive portion
of the decision states: 

WHEREFORE, viewed from the foregoing considerations, judgment is hereby

rendered finding the retrenchment of all the herein complainants not legal and just,
thus their termination inevitably becomes illegal.
 
Accordingly, respondent Oriental Petroleum & Minerals Corporation (OPMC) is
hereby ordered to pay all the complainants their full backwages and all appurtenant
benefits from the time of their dismissal on July 4, 1994 including loyalty bonus and
the cash equivalent of their accrued vacation and sick leave credits. In lieu of
reinstatement however, respondent OPMC is hereby ordered to pay each
complainant their separation pay equivalent to one (1) month gross salary per year
of service, a fraction of at least six (6) months equivalent to one (1) whole year,
the total award computed as follows:
exclusive of the award of loyalty bonus prevailing at the time of complainants
separation and the updated balances of complainants[] accrued vacation and sick
leave, also reckoned as of July 4, 1995. 
Attorney's fees equivalent to ten percent (10%) of the total monetary award is
likewise awarded to the complainants.
The claim for damages is hereby dismissed for lack of merit.
All individual respondents are hereby absolved of personal liability for they acted
only in their official capacity.
SO ORDERED. [10]

Labor II – 1
 

Petitioner instituted a partial appeal of the decision of the labor arbiter insofar as the latter ruled
that the retrenchment of respondents was invalid, as well as with respect to the award of
backwages.

Resolving the partial appeal, the NLRC held that petitioner's serious financial difficulties
necessitated the retrenchment of respondents. Petitioner's audited financial statements allegedly
showed that it had suffered a net loss in the amount of P107,812,816.00 in 1993; and that its
assets went down from P312.902 million in 1992 to P212.072 million in 1993, while its liabilities
soared from P376.01 million in 1992 to P519.143 million in 1993. Further, in order to raise
money to meet its maturing financial obligations, petitioner sold several of its shareholdings in
Magellan Capital Holdings Corporation and several assets consisting of cars, a townhouse, an
office condominium unit and some equipment. The land, building and other assets of its wholly-
owned subsidiary, Oriental Mahogany and Woodworks, Inc., were also sold for the same
purpose. A substantial number of its unissued shares of stock were likewise disposed of. [11]

The NLRC, therefore, reversed the decision of the labor arbiter and instead ordered petitioner to
pay respondents the severance compensation enumerated in its June 13 and June 30, 1994
letters. Respondents' motion for reconsideration was denied for lack of merit. [12]

Respondents filed a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure
(Rules of Court) with this Court. We required petitioner and the Office of the Solicitor General
(OSG) to file their respective comments but later referred the case to the Court of Appeals in
view of our ruling in St. Martin Funeral Homes v. NLRC. [13]

In its assailed Decision [14] dated July 31, 2001, the Court of Appeals reversed the decision of
the NLRC and reinstated that of the labor arbiter. The appellate court proceeded to review the
factual findings of the NLRC and ruled that petitioner failed to prove the existence of substantial
losses that would justify the retrenchment of respondents. Quoting the findings of the labor
arbiter, the Court of Appeals stated that petitioner enjoyed an increase in its operations revenue
from 1992 to 1993. The appellate court made short shrift of petitioner's claim that it had to sell
the bulk of its assets in order to meet its financial obligations.

Moreover, petitioner allegedly failed to prove that it resorted to less drastic and less permanent
cost-cutting measures before the decision to retrench respondents was implemented. Petitioner
also failed to rebut respondents' allegation that petitioner hired new personnel, especially
specialists and consultants with exorbitant salaries and generous fringe benefits, prior to and
even during the alleged retrenchment program; regularized temporary employees; and issued

Labor II – 1
and sold more than six (6) billion shares of its common stock for additional capitalization,
indicating a decision to actively invest even as the company was claiming bankruptcy.

Petitioner also allegedly failed to present evidence as to the criteria it used in effecting the
retrenchment, such as less preferred status, efficiency, and seniority.

In its Resolution [15] dated January 14, 2002, the Court of Appeals denied petitioner's motion
for reconsideration.

Petitioner is now before this Court arguing that it undertook a valid retrenchment as it was
already actually suffering serious financial losses at the time the retrenchment was undertaken.
It cites the same data and figures presented and adopted by the NLRC.

Moreover, the finding that petitioner hired new personnel and regularized temporary employees
prior to and during the retrenchment is allegedly without any factual and evidentiary support.
Respondents, on whom the burden of proving this affirmative allegation fell, did not even bother
to name who the alleged new employees were.

Petitioner also notes that the OSG itself, in its comment, stated that petitioner undertook the
retrenchment scheme as a last ditch effort to prevent further losses and that it complied with
the required notices both to the employees concerned and to the DOLE, leaving no doubt that
the retrenchment was done in good faith.

Further, petitioner maintains that the NLRC decision was supported by substantial evidence;
thus, the Court of Appeals should not have entertained the petition for certiorari, much less
made its own independent findings of fact.

Respondents filed a Comment [16] dated September 11, 2002, arguing mainly that the instant
petition should not be entertained as it raises questions of fact. They further argue that the
Court of Appeals was correct in reversing the decision of the NLRC because petitioner failed to
prove that it incurred substantial losses; show that retrenchment was a last resort and that
other less permanent cost-cutting measures had been availed of but had failed; and prove that it
followed the criteria in dismissing employees based on retrenchment; and because petitioner's
Corporate Secretary, Atty. Perry Pe, admitted that the decision to retrench was made ahead of
the decision to cut costs.

Petitioner filed a Reply [17] dated December 17, 2002, reiterating its arguments.

In the Resolution [18] dated January 22, 2003, the parties were required to submit their
respective memoranda. Accordingly, petitioner filed its Memorandum [19] on April 21, 2003,
while respondents filed theirs on May 13, 2003. [20]

Labor II – 1
We first resolve the question of whether, in a petition for certiorari assailing the decision of the
NLRC, the Court of Appeals may make an independent evaluation of facts.

Ordinarily 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. However, in St. Martin
Funeral Homes v. NLRC, supra, it was held that the special civil action of certiorari is the mode
of judicial review of the decisions of the NLRC either by this Court or the Court of Appeals,
although the latter court is the appropriate forum for seeking the relief desired in strict
observance of the doctrine on the hierarchy of courts and that, in the exercise of its power, the
Court of Appeals can review the factual findings or the legal conclusions of the NLRC. [21]

The Court of Appeals in this case, therefore, cannot be faulted for making a full review of the
factual findings of the NLRC. Whether it correctly disregarded these findings and reversed the
resultant decision is another matter which we will now proceed to review.

The fundamental question is, of course, whether the retrenchment was validly
undertaken. Retrenchment is one of the authorized causes recognized by the Labor
Code [22] for the dismissal of employees. It is a management prerogative resorted to by
employers to avoid or minimize business losses. The Court has laid down the following standards
that a company must meet to justify retrenchment and to foil abuse:

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 other 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

Labor II – 1
 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. [23]

Petitioner presented its audited financial statements for the years 1992 and 1993 to
demonstrate that retrenchment was necessary to put a stop to its actual losses and prevent
further losses. The financial statements show that petitioner's total current assets dipped
from P325,167,148.00 in 1992 to P221,001,191.00 in 1993. Its total current liabilities, on the
other hand, swelled from P373,571,128.00 in 1992 to P517,301,874.00 in 1993. Its costs
likewise increased from P262,698,049.00 in 1992 to P456,507,065.00 in 1993. The financial
statements reflect that petitioner suffered a net loss of P107,812,816.00 in 1993 contrasted with
its net earnings of P148,229,404.00 in 1992.

These figures do not bode well for petitioner's financial future. However, while it is true that the
Court has ruled that financial statements audited by independent external auditors constitute the
normal method of proof of the profit and loss performance of a Company, [24] financial
statements, in themselves, do not suffice to meet the stringent requirement of the law that the
losses must be substantial, continuing and without any immediate prospect of abating. [25]

Retrenchment being a measure of last resort, petitioner should have been able to demonstrate
that it expected no abatement of its losses in the coming years. Petitioner having failed in this
regard, we find that the Court of Appeals did not err in dismissing as unimpressive and
insufficient petitioner's audited financial statements.

Nonetheless, we disagree with the appellate court's ruling that petitioner was not able to prove
that retrenchment was resorted to only after less drastic means have been tried and found
wanting.

According to the labor arbiter and the Court of Appeals, petitioner failed to show that it adopted
other cost-cutting measures short of retrenchment. However, both failed to appreciate the
significance of petitioner's assertion borne out by the records that it took several measures prior
or parallel to retrenchment, such as: (1) the sale of its shareholdings in Magellan Capital
Holdings Corporation to raise money to pay off the oil drilling operator to avoid being declared in
default; (2) the sale of several of its assets consisting of cars, townhouse unit, and office
condominium unit (where petitioner holds office), and equipment like jaw crushers and other
scrap materials in the company's Sabina Mines in Mindanao; (3) the sale of the land, building
and other assets of its wholly-owned subsidiary, Oriental Mahogany and Woodworks, Inc.; and
(4) the call to its various stockholders to pay all of their unpaid subscriptions to petitioner's

Labor II – 1
capital stock and offer of pre-emptive rights to its stockholders for the sale of its Class B
Common Stocks to raise capital to meet its various obligations.

Even the OSG concedes that petitioner did take remedial measures to forestall losses. Further,
the allegations regarding the foregoing measures taken by petitioner as prior and parallel
solutions were never disputed by respondents.

Interestingly, it is only the Court of Appeals which cites respondents' allegation that petitioner
hired new personnel, purportedly with exorbitant salaries and generous fringe benefits, and
regularized temporary employees, and treats these as indicia that petitioner failed to adopt other
cost-cutting measures short of retrenchment. Notably, however, the records do not bear any
proof that this allegation was substantiated, at least by naming the supposed newly-hired
personnel or regularized employees. Hence, it deserves no weight in law.

As regards the rule that reasonable criteria be used in effecting retrenchment, such as but not
limited to: (a) less preferred status (e.g., temporary employee); (b) efficiency; and (c)
seniority, [26] we find that petitioner failed to demonstrate its transparency and good faith in the
implementation of its decision to retrench respondents. While it contends that the termination of
two (2) non-regular employees ahead of respondents shows that it complied with the requisite
fair and reasonable criteria, that fact alone is insufficient, considering the importance this Court
has given to the observance of fair and reasonable criteria in the implementation of a
retrenchment scheme.

In Philippine Tuberculosis Society, Inc. v. National Labor Union, [27] for instance, the Court
agreed with the finding of the NLRC that though petitioner therein was justified in ordering a
retrenchment, its implementation of the scheme without taking seniority into account rendered
the retrenchment invalid. In that case, petitioner's criteria for retrenchment included
dependability, adaptability, trainability, job performance, discipline and attitude towards work.
Quoting the NLRC, the Court stated:

We noted with concern that the criteria used by the Society failed to consider the
seniority factor in choosing those to be retrenched, a failure which, to our mind,
should invalidate the retrenchment, as the omission immediately makes the
selection process unfair and unreasonable. Things being equal, retaining a newly
hired employee and dismissing one who had occupied the position for years, even if
the scheme should result in savings for the employer, since he would be paying the
newcomer a relatively smaller wage, is simply unconscionable and violative of the
senior employee's tenurial rights. In Villena v. NLRC, 193 SCRA 686, February 7,
1991, the Supreme Court considered the seniority factor an important ingredient
for the validity of a retrenchment program. According to the Court, the following
legal procedure should be observed for a retrenchment to be valid: (a) one-month
prior notice to the employee as prescribed by Article 282 of the Labor Code; and (b)
use of a fair and reasonable criteria in carrying out the retrenchment program, such

Labor II – 1
 as 1) less preferred status (as in the case of temporary employees), 2) efficiency
rating, 3) seniority, and 4) proof of claimed financial losses. [28]

In this case, petitioner presents the following allegation in rebuttal of the appellate court's
finding that it failed to comply with the required criteria set by jurisprudence in effecting
retrenchment:

More importantly, it further shows that with the retrenchment of non-

regular employees in the person of Atty. Sison and Mr. Gagni, the Petitioner was
not remised (sic) in complying with the required fair and reasonable criteria laid
down by the Supreme Court in cases of retrenchment. [29]

Such a bare allegation is obviously unsatisfactory. If we struck down the retrenchment

undertaken by the Philippine Tuberculosis Society, Inc. in the above-cited case for failure to take
seniority into account, with more reason should the retrenchment in this case be held invalid,
considering that petitioner utterly failed to show that it had any standard at all in selecting the
employees to be retrenched. Verily, the assistance that two (2) non-regular employees were
similarly retrenched ahead of respondents appears more like a handy excuse than any deliberate
effort on petitioner's part to follow the fair and reasonable criteria established by jurisprudence.

WHEREFORE, the instant petition is hereby DENIED.

Labor II – 1
33.) G.R. No. 178083

FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES (FASAP), Petitioner

vs.
PHILIPPINE AIRLINES, INC., PATRIA CHIONG and THE COURT OF APPEALS, Respondents

IN RE: LETTERS OF ATTY. ESTELITO P. MENDOZA RE: G.R. NO. 178083 - FLIGHT ATTENDANTS AND
STEWARDS ASSOCIATION OF THE PHILIPPINES (F ASAP) vs. PHILIPPINE AIRLINES, INC., ETAL.

RESOLUTION

BERSAMIN, J.:

In determining the validity of a retrenchment, judicial notice may be taken of the financial losses incurred by an
employer undergoing corporate rehabilitation. In such a case, the presentation of audited financial statements may
not be necessary to establish that the employer is suffering from severe financial losses.

Before the Court are the following matters for resolution, namely:

(a) Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for Reconsideration
of the Decision of July 22, 2008 filed by respondents Philippine Airlines, Inc. (PAL) and Patria Chiong;  and
1

(b) Motion for Reconsideration [Re: The Honorable Court’s Resolution dated 13 March 2012 ]  of petitioner
2

Flight Attendants and Stewards Association of the Philippines (FASAP).

Antecedents

To provide a fitting backgrounder for this resolution, we first lay down the procedural antecedents.

Resolving the appeal of F ASAP, the Third Division of the Court  promulgated its decision on July 22, 2008 reversing
3

the decision promulgated on August 23, 2006 by the Court of Appeals (CA) and entering a new one finding PAL
guilty of unlawful retrenchment,  disposing:
4

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No.
87956 dated August 23, 2006, which affirmed the Decision of the NLRC setting aside the Labor Arbiter's findings of
illegal retrenchment and its Resolution of May 29, 2007 denying the motion for reconsideration, are REVERSED
and SET ASIDE and a new one is rendered:

1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;

2. ORDERING Philippine Airlines, Inc. to reinstate the cabin crew personnel who were covered by the retrenchment
and demotion scheme of June 15, 1998 made effective on July 15, 1998, without loss of seniority rights and other
privileges, and to pay them full backwages, inclusive of allowances and other monetary benefits computed from the
time of their separation up to the time of their actual reinstatement, provided that with respect to those who had
received their respective separation pay, the amounts of payments shall be deducted from their backwages. Where
reinstatement is no longer feasible because the positions previously held no longer exist, respondent Corporation
shall pay backwages plus, in lieu of reinstatement, separation pay equal to one (1) month pay for every year of
service;

3. ORDERING Philippine Airlines, Inc. to pay attorney's fees equivalent to ten percent (10%) of the total monetary
award.

Costs against respondent PAL.

Labor II – 1
SO ORDERED.  5

The Third Division thereby differed from the decision of the Court of Appeals (CA), which had pronounced in its
appealed decision promulgated on August 23, 2006  that the remaining issue between the parties concerned the
6

manner by which PAL had carried out the retrenchment program.  Instead, the Third Division disbelieved the
7

veracity of PAL’s claim of severe financial losses, and concluded that PAL had not established its severe financial
losses because of its non-presentation of audited financial statements. It further concluded that PAL had
implemented the retrenchment program in bad faith, and had not used fair and reasonable criteria in selecting the
employees to be retrenched.

After PAL filed its Motion for Reconsideration,   the Court, upon motion,  held oral arguments on the following issues:
8 9

WHETHER THE GROUNDS FOR RETRENCHMENT WERE ESTABLISHED

II

WHETHER PAL RESORTED TO OTHER COST-CUTTING MEASURES BEFORE IMPLEMENTING ITS

RETRENCHMENT PROGRAM

III

WHETHER FAIR AND REASONABLE CRITERIA WERE FOLLOWED IN IMPLEMENTING THE RETRECHMENT
PROGRAM

IV

WHETHER THE QUITCLAIMS WERE VALIDLY AND VOLUNTARILY EXECUTED

Upon conclusion of the oral arguments, the Court directed the parties to explore a possible settlement and to submit
their respective memoranda.  Unfortunately, the parties did not reach any settlement; hence, the Court, through the
10

Special Third Division,  resolved the issues on the merits through the resolution of October 2, 2009 denying PAL’s
11

motion for reconsideration,  thus:

12

WHEREFORE, for lack of merit, the Motion for Reconsideration is hereby DENIED with FINALITY. The assailed
Decision dated July 22, 2008 is AFFIRMED with MODIFICATION in that the award of attorney's fees and expenses
of litigation is reduced to ₱2,000,000.00. The case is hereby REMANDED to the Labor Arbiter solely for the purpose
of computing the exact amount of the award pursuant to the guidelines herein stated.

No further pleadings will be entertained.

SO ORDERED. 13

The Special Third Division was unconvinced by PAL’s change of theory in urging the June 1998 Association of
Airline Pilots of the Philippines (ALP AP) pilots' strike as the reason behind the immediate retrenchment; and
observed that the strike was a temporary occurrence that did not require the immediate and sweeping retrenchment
of around 1,400 cabin crew.

Not satisfied, PAL filed the Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for
Reconsideration of the Decision of July 22, 2008. 14

On October 5, 2009, the writer of the resolution of October 2, 2009, Justice Consuelo Ynares-Santiago, compulsorily
retired from the Judiciary. Pursuant to A.M. No. 99-8-09-SC,  G.R. No. 178083 was then raffled to Justice
15

Presbitero J. Velasco, Jr., a Member of the newly-constituted regular Third Division.  Upon the Court's subsequent
16

Labor II – 1
reorganization,  G.R. No. 178083 was transferred to the First Division where Justice Velasco, Jr. was meanwhile re-
17

assigned. Justice Velasco, Jr. subsequently inhibited himself from the case due to personal reasons.  Pursuant to
18

SC Administrative Circular No. 84-2007, G.R. No. 178083 was again re-raffled to Justice Arturo D. Brion, whose
membership in the Second Division resulted in the transfer of G.R. No. 178083 to said Division. 19

On September 7, 2011, the Second Division denied with finality PAL’s Second Motion for Reconsideration of the
Decision of July 22, 2008.20

Thereafter, PAL, through Atty. Estelito P. Mendoza, its collaborating counsel, sent a series of letters inquiring into
the propriety of the successive transfers of G.R. No. 178083.  His letters were docketed as A.M. No. 11- 10-1-SC.
21

On October 4, 2011, the Court En Banc issued a resolution:  (a) assuming jurisdiction over G.R. No.
22

178083; (b) recalling the September 7, 2011 resolution of the Second Division; and (c) ordering the re-raffle of G.R.
No. 178083 to a new Member-in-Charge.

Resolving the issues raised by Atty. Mendoza in behalf of PAL, as well as the issues raised against the recall of the
resolution of September 7, 2011, the Court En Banc promulgated its resolution in A.M. No. 11-10-1-SC on March
13, 2012,  in which it summarized the intricate developments involving G.R. No. 178083, viz.:
23

To summarize all the developments that brought about the present dispute--expressed in a format that can more
readily be appreciated in terms of the Court en bane's ruling to recall the September 7, 2011 ruling - the F ASAP
case, as it developed, was attended by special and unusual circumstances that saw:

(a) the confluence of the successive retirement of three Justices (in a Division of five Justices) who actually
participated in the assailed Decision and Resolution;

(b) the change in the governing rules-from the A.M.s to the IRSC regime-which transpired during the
pendency of the case;

(c) the occurrence of a series of inhibitions in the course of the case (Justices Ruben Reyes, Leonardo-De
Castro, Corona, Velasco, and Carpio), and the absences of Justices Sereno and Reyes at the critical time,
requiring their replacement; notably, Justices Corona, Carpio, Velasco and Leonardo-De Castro are the four
most senior Members of the Court;

(d) the three re-organizations of the divisions, which all took place during the pendency of the case,
necessitating the transfer of the case from the Third Division, to the First, then to the Second Division;

(e) the unusual timing of Atty. Mendoza’s letters, made after the ruling Division had issued its Resolution of
September 7, 2011, but before the parties received their copies of the said Resolution; and

(t) finally, the time constraint that intervened, brought about by the parties’ receipt on September 19, 2011 of
the Special Division’s Resolution of September 7, 2011, and the consequent running of the period for finality
computed from this latter date; and the Resolution would have lapsed to finality after October 4, 2011, had it
not been recalled by that date.

All these developments, in no small measure, contributed in their own peculiar way to the confusing situations that
attended the September 7, 2011 Resolution, resulting in the recall of this Resolution by the Court en banc. 24

In the same resolution of March 13, 2012, the Court En Banc directed the re-raffle of G.R. No. 178083 to the
remaining Justices of the former Special Third Division who participated in resolving the issues pursuant to Section
7, Rule 2 of the Internal Rules of the Supreme Court, explaining:

On deeper consideration, the majority now firmly holds the view that Section 7, Rule 2 of the IRSC should have
prevailed in considering the raffle and assignment of cases after the 2nd MR was accepted, as advocated by some
Members within the ruling Division, as against the general rule on inhibition under Section 3, Rule 8. The underlying

Labor II – 1
constitutional reason, of course, is the requirement of Section 4(3), Article VIII of the Constitution already referred to
above.

The general rule on statutory interpretation is that apparently conflicting provisions should be reconciled and
harmonized, as a statute must be so construed as to harmonize and give effect to all its provisions whenever
possible. Only after the failure at this attempt at reconciliation should one provision be considered the applicable
provision as against the other.

Applying these rules by reconciling the two provisions under consideration, Section 3, Rule 8 of the IRSC should
be read as the general rule applicable to the inhibition of a Member-in-Charge. This general rule should,
however, yield where the inhibition occurs at the late stage of the case when a decision or signed resolution
is assailed through an MR. At that point, when the situation calls for the review of the merits of the decision or
the signed resolution made by a ponente (or writer of the assailed ruling), Section 3, Rule 8 no longer applies and
must yield to Section 7, Rule 2 of the IRSC which contemplates a situation when the ponente is no longer
available, and calls for the referral of the case for raffle among the remaining Members of the Division who
acted on the decision or on the signed resolution. This latter provision should rightly apply as it gives those who
intimately know the facts and merits of the case, through their previous participation and deliberations, the chance to
take a look at the decision or resolution produced with their participation.

To reiterate, Section 3, Rule 8 of the IRSC is the general rule on inhibition, but it must yield to the more specific
Section 7, Rule 2 of the IRSC where the obtaining situation is for the review on the merits of an already issued
decision or resolution and the ponente or writer is no longer available to act on the matter. On this basis,
the ponente, on the merits of the case on review, should be chosen from the remaining participating Justices,
namely, Justices Peralta and Bersamin. 25

This last resolution impelled F ASAP to file the Motion for Reconsideration [Re: The Honorable Court’s Resolution
dated 13 March 2012], praying that the September 7, 2011 resolution in G.R. No. 178083 be reinstated. 26

We directed the consolidation of G.R. No. 178083 and A.M. No. 11- 10-1-SC on April 17, 2012. 27

Issues

PAL manifests that the Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for
Reconsideration of the Decision of July 22, 2008 is its first motion for reconsideration vis-a-vis the October 2, 2009
resolution, and its second as to the July 22, 2008 decision. It states therein that because the Court did not address
the issues raised in its previous motion for reconsideration, it is re-submitting the same, viz.:

xxx THE HONORABLE COURT ERRED IN NOT GIVING CREDENCE TO THE FOLLOWING COMPELLING
EVIDENCE AND CIRCUMSTANCES CLEARLY SHOWING PALS; DIRE FINANCIAL CONDITION AT THE TIME
OF THE RETRENCHMENT: (A) PETITIONER'S ADMISSIONS OF PAL'S FINANCIAL LOSSES; (B) THE
UNANIMOUS FINDINGS OF THE SECURITIES AND EXCHANGE COMMISSION (SEC), THE LABOR ARBITER,
THE NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND THE COURT OF APPEALS CONFIRMING
PAL'S FINANCIAL CRISIS; (C) PREVIOUS CASES DECIDED BY THE HONORABLE COURT RECOGNIZING
PAL'S DIRE FINANCIAL STATE; AND (D) PAL BEING PLACED BY THE SEC UNDER SUSPENSION OF
PAYMENTS AND CORPORATE REHABILITATION AND RECEIVERSHIP

II

xxx THERE IS NO SUFFICIENT BASIS FOR THE HONORABLE COURT'S CONCLUSION THAT PAL DID NOT
EXERCISE GOOD FAITH [IN] ITS PREROGATIVE TO RETRENCH EMPLOYEES

III

Labor II – 1
THE HONORABLE COURT'S RULING THAT PAL DID NOT USE FAIR AND REASONABLE CRITERIA IN
ASCERTAINING WHO WOULD BE RETRENCHED IS CONTRARY TO ESTABLISHED FACTS, EVIDENCE ON
RECORD AND THE FINDINGS OF THE NLRC AND THE COURT OF APPEALS 28

PAL insists that FASAP, while admitting PAL’s serious financial condition, only questioned before the Labor Arbiter
the alleged unfair and unreasonable measures in retrenching the employees;  that F ASAP categorically manifested
29

before the NLRC, the CA and this Court that PAL’s financial situation was not the issue but rather the manner of
terminating the 1,400 cabin crew; that the Court's disregard of FASAP's categorical admissions was contrary to the
dictates of fair play;  that considering that the Labor Arbiter, the NLRC and the CA unanimously found PAL to have
30

experienced financial losses, the Court should have accorded such unanimous findings with respect and
finality;  that its being placed under suspension of payments and corporate rehabilitation and receivership already
31

sufficiently indicated its grave financial condition;  and that the Court should have also taken judicial notice of the
32

suspension of payments and monetary claims filed against PAL that had reached and had been consequently
resolved by the Court. 33

PAL describes the Court's conclusion that it was not suffering from tremendous financial losses because it was on
the road to recovery a year after the retrenchment as a mere obiter dictum that was relevant only in rehabilitation
proceedings; that whether or not its supposed "stand-alone" rehabilitation indicated its ability to recover on its own
was a technical issue that the SEC was tasked to determine in the rehabilitation proceedings; that at any rate, the
supposed track to recovery in 1999 and the capital infusion of $200,000,000.00 did not disprove the enormous
losses it was sustaining; that, on the contrary, the capital infusion accented the severe financial losses suffered
because the capital infusion was a condition precedent to the approval of the amended and restated rehabilitation
plan by the Securities and Exchange Commission (SEC) with the conformity of PAL's creditors; and that PAL took
nine years to exit from rehabilitation.
34

As regards the implementation of the retrenchment program in good faith, PAL argues that it exercised sound
management prerogatives and business judgment despite its critical financial condition; that it did not act in due
haste in terminating the services of the affected employees considering that FASAP was being consulted thereon as
early as February 17, 1998; that it abandoned "Plan 14" due to intervening events, and instead proceeded to
implement "Plan 22" which led to the recall/rehire of some of the retrenched employees;  and that in selecting the
35

employees to be retrenched, it adopted a fair and reasonable criteria pursuant to the collective bargaining
agreement (CBA) where performance efficiency ratings and inverse seniority were basic considerations. 36

With reference to the Court's resolution of October 2, 2009, PAL maintains that:

PAL HAS NOT CHANGED ITS POSITION THAT THE REDUCTION OF PAL'S LABOR FORCE OF ABOUT 5,000
EMPLOYEES, INCLUDING THE 1,423 FASAP MEMBERS, WAS THE RESULT OF A CONFLUENCE OF
EVENTS, THE EXPANSION OF PAL’S FLEET, THE ASIAN FINANCIAL CRISIS OF 1997, AND ITS
CONSEQUENCES ON PAL'S OPERATIONS, AND THE PILOT’S STRIKE OF JUNE 1998, AND THAT PAL
SURVIVED BECAUSE OF THE IMPLEMENTATION OF ITS REHABILITATION PLAN (LATER "AMENDED AND
RESTATED REHABILITATION PLAN") WHICH INCLUDED AMONG ITS COMPONENT ELEMENTS, THE
REDUCTION OF LABOR FORCE

II

THE HONORABLE COURT SHOULD HAVE UPHELD PAL'S REDUCTION OF THE NUMBER OF CABIN CREW
IN ACCORD WITH ITS ENTRY INTO REHABILITATION AND THE CONSEQUENT TERMINATION OF
EMPLOYMENT OF CABIN CREW PERSONNEL AS A VALID EXERCISE OF MANAGEMENT PREROGATIVE

III

PAL HAS SUFFICIENTLY ESTABLISHED THE SEVERITY OF ITS FINANCIAL LOSSES, SO AS TO JUSTIFY
THE ENTRY INTO REHABILITATION AND THE CONSEQUENT REDUCTION OF CABIN CREW PERSONNEL

Labor II – 1
 IV

THE HONORABLE COURT ERRED IN HOLDING THAT THERE WAS NO SUFFICIENT BASIS FOR PAL TO
IMPLEMENT THE RETRENCHMENT OF CABIN CREW PERSONNEL

UNDER THE CIRCUMSTANCES, THE PRIOR IMPLEMENTATION OF LESS DRASTIC COST-CUTTING

MEASURES WAS NO LONGER POSSIBLE AND SHOULD NOT BE REQUIRED FOR A VALID
RETRENCHMENT; IN ANY EVENT, PAL HAD IMPLEMENTED LESS DRASTIC COST-CUTTING MEASURES
BEFORE IMPLEMENTING THE DOWNSIZING PROGRAM

VI

QUITCLAIMS WERE VALIDLY EXECUTED 37

PAL contends that the October 2, 2009 resolution focused on an entirely new basis - that of PAL’s supposed
change in theory. It denies having changed its theory, however, and maintains that the reduction of its workforce
had resulted from a confluence of several events, like the flight expansion; the 1997 Asian financial crisis; and the
ALP AP pilots’ strike.  PAL explains that when the pilots struck in June 1998, it had to decide quickly as it was then
38

facing closure in 18 days due to serious financial hemorrhage; hence, the strike came as the final blow.

PAL posits that its business decision to downsize was far from being a hasty, knee-jerk reaction; that the reduction
of cabin crew personnel was an integral part of its corporate rehabilitation, and, such being a management decision,
the Court could not supplant the decision with its own judgment’ and that the inaccurate depiction of the strike as a
temporary disturbance was lamentable in light of its imminent financial collapse due to the concerted action. 39

PAL submits that the Court’s declaration that PAL failed to prove its financial losses and to explore less drastic cost-
cutting measures did not at all jibe with the totality of the circumstances and evidence presented; that the consistent
findings of the Labor Arbiter, the NLRC, the CA and even the SEC, acknowledging its serious financial difficulties
could not be ignored or disregarded; and that the challenged rulings of the Court conflicted with the
pronouncements made in Garcia v. Philippine Airlines, Inc.   and related cases  that acknowledged PAL’s grave
40 41

financial distress.

In its comment,  FASAP counters that a second motion for reconsideration was a prohibited pleading; that PAL
42

failed to prove that it had complied with the requirements for a valid retrenchment by not submitting its audited
financial statements; that PAL had immediately terminated the employees without prior resort to less drastic
measures; and that PAL did not observe any criteria in selecting the employees to be retrenched.

FASAP stresses that the October 4, 2011 resolution recalling the September 7, 2011 decision was void for failure to
comply with Section 14, Article VIII of the 1987 Constitution; that the participation of Chief Justice Renato C. Corona
who later on inhibited from G.R. No. 178083 had further voided the proceedings; that the 1987 Constitution did not
require that a case should be raffled to the Members of the Division who had previously decided it; and that there
was no error in raffling the case to Justice Brion, or, even granting that there was error, such error was merely
procedural.

The issues are restated as follows:

Procedural

IS THE RESOLUTION DATED OCTOBER 4, 2011 IN A.M. NO. 11-10- 1-SC (RECALLING THE SEPTEMBER 7,
2011 RESOLUTION) VOID FOR FAIL URE TO COMPLY WITH SECTION 14, RULE VIII OF THE 1987
CONSTITUTION?

Labor II – 1
 II

MAY THE COURT ENTERTAIN THE SECOND MOTION FOR RECONSIDERATION FILED BY THE
RESPONDENT PAL?

Substantive

DID PAL LAWFULLY RETRENCH THE 1,400 CABIN CREW PERSONNEL?

DID PAL PRESENT SUFFICIENT EVIDENCE TO PROVE THAT IT INCURRED SERIOUS FINANCIAL LOSSES
WHICH JUSTIFIED THE DOWNSIZING OF ITS CABIN CREW?

DID PAL OBSERVE GOOD FAITH IN IMPLEMENTING THE RETRENCHMENT PROGRAM?

DID PAL COMPLY WITH SECTION 112 OF THE PALF ASAP CBA IN SELECTING THE EMPLOYEES TO BE
RETRENCHED?

III

ASSUMING THAT PAL VALIDLY IMPLEMENTED ITS RETRENCHMENT PROGRAM, DID THE RETRENCHED
EMPLOYEES SIGN VALID QUITCLAIMS?

Ruling of the Court

After a thorough review of the records and all previous dispositions, we GRANT the Motion for Reconsideration of
the Resolution of October 2, 2009 and Second Motion for Reconsideration of the Decision of July 22, 2008 filed by
PAL and Chiong; and DENY the Motion for Reconsideration [Re: The Honorable Court’s Resolution dated 13 March
2012]  of FASAP.
43

Accordingly, we REVERSE the July 22, 2008 decision and the October 2, 2009 resolution; and AFFIRM the
decision promulgated on August 23, 2006 by the CA.

The resolution of October 4, 2011

was a valid issuance of the Court

The petitioner urges the Court to declare as void the October 4, 2011 resolution promulgated in A.M. No. 11-10-1-
SC for not citing any legal basis in recalling the September 7, 2011 resolution of the Second Division.

The urging of the petitioner is gravely flawed and mistaken.

The requirement for the Court to state the legal and factual basis for its decisions is found in Section 14, Article VIII
of the 1987 Constitution, which reads:

Section 14. No decision shall be rendered by any court without expressing therein clearly and distinctly the facts and
the law on which it is based.
Labor II – 1
The constitutional provision clearly indicates that it contemplates only a decision, which is the judgment or order that
adjudicates on the merits of a case. This is clear from the text and tenor of Section 1, Rule 36 of the Rules of Court,
the rule that implements the constitutional provision, to wit:

Section 1. Rendition of judgments and final orders. A judgment or final order determining the merits of the
case shall be in writing personally and directly prepared by the judge, stating clearly and distinctly the facts and
the law on which it is based, signed by him, and filed with the clerk of court.

The October 4, 2011 resolution did not adjudicate on the merits of G.R. No. 178083. We explicitly stated so in the
resolution of March 13, 2012. What we thereby did was instead to exercise the Court's inherent power to recall
orders and resolutions before they attain finality. In so doing, the Court only exercised prudence in order to ensure
that the Second Division was vested with the appropriate legal competence in accordance with and under the
Court's prevailing internal rules to review and resolve the pending motion for reconsideration. We rationalized the
exercise thusly:

As the narration in this Resolution shows, the Court acted on its own pursuant to its power to recall its own
orders and resolutions before their finality. The October 4, 2011 Resolution was issued to determine the
propriety of the September 7, 2011 Resolution given the facts that came to light after the ruling Division's
examination of the records. To point out the obvious, the recall was not a ruling on the merits and did not
constitute the reversal of the substantive issues already decided upon by the Court in the FASAP case in its
previously issued Decision (of July 22, 2008) and Resolution (of October 2, 2009). In short, the October 4,
2011 Resolution was not meant and was never intended to favor either party, but to simply remove any doubt about
the validity of the ruling Division's action on the case. The case, in the ruling Division's view, could be brought to the
Court en banc since it is one of "sufficient importance"; at the very least, it involves the interpretation of conflicting
provisions of the IRSC with potential jurisdictional implications.

At the time the Members of the ruling Division went to the Chief Justice to recommend a recall, there was no clear
indication of how they would definitively settle the unresolved legal questions among themselves. The only matter
legally certain was the looming finality of the September 7, 2011 Resolution if it would not be immediately recalled
by the Court en banc by October 4, 2011. No unanimity among the Members of the ruling Division could be
gathered on the unresolved legal questions; thus, they concluded that the matter is best determined by the Court en
banc as it potentially involved questions of jurisdiction and interpretation of conflicting provisions of the IRSC. To the
extent of the recommended recall, the ruling Division was unanimous and the Members communicated this intent to
the Chief Justice in clear and unequivocal terms.  (Bold underscoring for emphasis)
44

It should further be clear from the same March 13, 2012 resolution that the factual considerations for issuing the
recall order were intentionally omitted therefrom in obeisance to the prohibition against public disclosure of the
internal deliberations of the Court.
45

Still, F ASAP assails the impropriety of the recall of the September 7, 2011 resolution. It contends that the raffle of
G.R. No. 178083 to the Second Division had not been erroneous but in "full and complete consonance with Section
4(3) Article VIII of the Constitution;"  and that any error thereby committed was only procedural, and thus a
46

mere "harmless error" that did not invalidate the prior rulings made in G.R. No. 178083. 47

The contention of F ASAP lacks substance and persuasion.

The Court carefully expounded in the March 13, 2012 resolution on the resulting jurisdictional conflict that arose
from the raffling of G.R. No. 178083 resulting from the successive retirements and inhibitions by several Justices
who at one time or another had been assigned to take part in the case. The Court likewise highlighted the
importance of referring the case to the remaining Members who had actually participated in the deliberations, for not
only did such participating Justices intimately know the facts and merits of the parties' arguments but doing so would
give to such Justices the opportunity to review their decision or resolution in which they had taken part. As it turned
out, only Justice Diosdado M. Peralta and Justice Lucas P. Bersamin were the remaining Members of the Special
Third Division, and the task of being in charge procedurally fell on either of them.  As such, it is fallacious for FASAP
48

to still insist that the previous raffle had complied with Section 4(3), Article VIII of the 1987 Constitution just because
the Members of the Division actually took part in the deliberations.

Labor II – 1
FASAP is further wrong to insist on the application of the harmless error rule. The rule is embodied in Section 6,
Rule 51 of the Rules of Court, which states:

Section 6. Harmless error. No error in either the admission or the exclusion of evidence and no error or defect in any
ruling or order or in anything done or omitted by the trial court or by any of the parties is ground for granting a new
trial or for setting aside, modifying, or otherwise disturbing a judgment or order, unless refusal to take such action
appears to the court inconsistent with substantial justice. The court at every stage of the proceedings must disregard
any error or defect which does not affect the substantial rights of the parties.

The harmless error rule obtains during review of the things done by either the trial court or by any of the parties
themselves in the course of trial, and any error thereby found does not affect the substantial rights or even the
merits of the case. The Court has had occasions to apply the rule in the correction of a misspelled name due to
clerical error;  the signing of the decedents' names in the notice of appeal by the heirs;  the trial court's treatment of
49 50

the testimony of the party as an adverse witness during cross-examination by his own counsel;  and the failure of
51

the trial court to give the plaintiffs the opportunity to orally argue against a motion.  All of the errors extant in the
52

mentioned situations did not have the effect of altering the dispositions rendered by the respective trial courts.
Evidently, therefore, the rule had no appropriate application herein.

The Court sees no justification for the urging of FASAP that the participation of the late Chief Justice Corona voided
the recall order. The urging derives from FASAP’s failure to distinguish the role of the Chief Justice as the Presiding
Officer of the Banc. In this regard, we advert to the March 13, 2012 resolution, where the Court made the following
observation:

A final point that needs to be fully clarified at this juncture, in light of the allegations of the Dissent is the role of the
Chief Justice in the recall of the September 7, 2011 Resolution. As can be seen from the xxx narration, the Chief
Justice acted only on the recommendation of the ruling Division, since he had inhibited himself from
participation in the case long before. The confusion on this matter could have been brought about by the
Chief Justice's role as the Presiding Officer ofthe Court en banc (particularly in its meeting of October 4,
2011), and the fact that the four most senior Justices of the Court (namely, Justices Corona, Carpio,
Velasco and Leonardo-De Castro) inhibited from participating in the case. In the absence of any clear
personal malicious participation, it is neither correct nor proper to hold the Chief Justice personally
accountable for the collegial ruling of the Court en banc.  (Bold underscoring supplied for emphasis)
53

To reiterate, the Court, whether sitting En Banc or in Division, acts as a collegial body. By virtue of the collegiality,
the Chief Justice alone cannot promulgate or issue any decisions or orders. In Complaint of Mr. Aurelio Jndencia
Arrienda Against SC Justices Puna, Kapunan, Pardo, YnaresSantiago,   the Court has elucidated on the collegial
54

nature of the Court in relation to the role of the Chief Justice, viz.:

The complainant’s vituperation against the Chief Justice on account of what he perceived was the latter's refusal "to
take a direct positive and favorable action" on his letters of appeal overstepped the limits of proper conduct. It
betrayed his lack of understanding of a fundamental principle in our system of laws. Although the Chief Justice
is primus inter pares, he cannot legally decide a case on his own because of the Court's nature as a collegial body.
Neither can the Chief Justice, by himself, overturn the decision of the Court, whether of a division or the en banc.

There is only one Supreme Court from whose decisions all other courts are required to take their bearings.While
most of the Court's work is performed by its three divisions, the Court remains one court-single, unitary, complete
and supreme. Flowing from this is the fact that, while individual justices may dissent or only partially concur, when
the Court states what the law is, it speaks with only one voice. Any doctrine or principle of law laid down by the court
may be modified or reversed only by the Court en banc. 55

Lastly, any lingering doubt on the validity of the recall order should be dispelled by the fact that the Court upheld its
issuance of the order through the March 13, 2012 resolution, whereby the Court disposed:

WHEREFORE, premises considered, we hereby confirm that the Court en bane has assumed jurisdiction over
the resolution of the merits of the motions for reconsideration of Philippine Airlines, Inc., addressing our
July 22, 2008 Decision and October 2, 2009 Resolution; and that the September 7, 2011 ruling of the Second
Division has been effectively recalled. This case should now be raffled either to Justice Lucas P. Bersamin or
Labor II – 1
Justice Diosdado M. Peralta (the remaining members of the case) as Member-in-Charge in resolving the merits of
these motions.

xxxx

The Flight Attendants and Stewards Association of the Philippines’ Motion for Reconsideration of October
17, 2011 is hereby denied; the recall of the September 7, 2011 Resolution was made by the Court on its own
before the ruling’s finality pursuant to the Court’s power of control over its orders and resolutions. Thus, no
due process issue ever arose.

SO ORDERED.

II

PAL's Second Motion for Reconsideration

| of the Decision of July 22, 2008
| could be allowed in the higher interest of justice

FASAP asserts that PAL’s Second Motion for Reconsideration of the Decision of July 22, 2008 was a prohibited
pleading; and that the July 22, 2008 decision was not anymore subject to reconsideration due to its having already
attained finality.

FASAP’s assertions are unwarranted.

With the Court’s resolution of January 20, 2010 granting PAL’s motion for leave to file a second motion for
reconsideration,  PAL's Second Motion for Reconsideration of the Decision of July 22, 2008 could no longer be
56

challenged as a prohibited pleading. It is already settled that the granting of the motion for leave to file and admit a
second motion for reconsideration authorizes the filing of the second motion for reconsideration.  Thereby, the
57

second motion for reconsideration is no longer a prohibited pleading, and the Court cannot deny it on such basis
alone.58

Nonetheless, we should stress that the rule prohibiting the filing of a second motion for reconsideration is by no
means absolute. Although Section 2, Rule 52 of the Rules of Court disallows the filing of a second motion for
reconsideration,  the Internal Rules of the Supreme Court (IRSC) allows an exception, to wit:
59

Section 3. Second motion for reconsideration. - The Court shall not entertain a second motion for reconsideration,
and any exception to this rule can only be granted in the higher interest of justice by the Court en
bane upon a vote of at least two-thirds of its actual membership. There is reconsideration "in the higher interest
of justice" when the assailed decision is not only legally erroneous, but is likewise patently unjust and potentially
capable of causing unwarranted and irremediable injury or damage to the parties. A second motion for
reconsideration can only be entertained before the ruling sought to be reconsidered becomes final by
operation of law or by the Court's declaration.

In the Division, a vote of three Members shall be required to elevate a second motion for reconsideration to the
Court en banc.

The conditions that must concur in order for the Court to entertain a second motion for reconsideration are the
following, namely:

1. The motion should satisfactorily explain why granting the same would be in the higher interest of justice;

2. The motion must be made before the ruling sought to be reconsidered attains finality;

3. If the ruling sought to be reconsidered was rendered by the Court through one of its Divisions, at least
three members of the Division should vote to elevate the case to the Court En Banc; and

Labor II – 1
 4. The favorable vote of at least two-thirds of the Court En Bane’s actual membership must be mustered for
the second motion for reconsideration to be granted. 60

Under the IRSC, a second motion for reconsideration may be allowed to prosper upon a showing by the movant that
a reconsideration of the previous ruling is necessary in the higher interest of justice. There is higher interest of
justice when the assailed decision is not only legally erroneous, but is likewise patently unjust and potentially
capable of causing unwarranted and irremediable injury or damage to the parties. 61

PAL maintains that the July 22, 2008 decision contravened prevailing jurisprudence  that had recognized its
62

precarious financial condition;  that the decision focused on PAL’s inability to prove its financial losses due to its
63

failure to submit audited financial statements; that the decision ignored the common findings on the serious financial
losses suffered by PAL made by the Labor Arbiter, the NLRC, the CA and even the SEC;  and that the decision and
64

the subsequent resolution denying PAL’s motion for reconsideration would negate whatever financial progress it had
achieved during its rehabilitation.65

These arguments of PAL sufficed to show that the assailed decision contravened settled jurisprudence on PAL’s
precarious financial condition. It cannot be gainsaid that there were other businesses undergoing rehabilitation that
would also be bound or negatively affected by the July 22, 2008 decision. This was the higher interest of justice that
the Court sought to address, which the dissent by Justice Leonen is adamant not to accept.  Hence, we deemed it
66

just and prudent to allow PAL’s Second Motion for Reconsideration of the Decision of July 22, 2008.

It is timely to note, too, that the July 22, 2008 decision did not yet attain finality. The October 4, 2011
resolution recalled the September 7, 2011 resolution denying PAL’s first motion for reconsideration. Consequently,
the July 22, 2008 decision did not attain finality.

The dissent by Justice Leonen nonetheless proposes a contrary view- that both the July 22, 2008 decision and the
October 2, 2009 resolution had become final on November 4, 2009 upon the lapse of 15 days following PAL’s
receipt of a copy of the resolution. To him, the grant of leave to PAL to file the second motion for reconsideration
only meant that the motion was no longer prohibited but it did not stay the running of the reglementary period of 15
days. He submits that the Court’s grant of the motion for leave to file the second motion for reconsideration did not
stop the October 2, 2009 resolution from becoming final because a judgment becomes final by operation of law, not
by judicial declaration.
67

The proposition of the dissent is unacceptable.

In granting the motion for leave to file the second motion for reconsideration, the Court could not have intended to
deceive the movants by allowing them to revel in some hollow victory. The proposition manifestly contravened the
basic tenets of justice and fairness.

As we see it, the dissent must have inadvertently ignored the procedural effect that a second motion for
reconsideration based on an allowable ground suspended the running of the period for appeal from the date of the
filing of the motion until such time that the same was acted upon and granted.  Correspondingly, granting the motion
68

for leave to file a second motion for reconsideration has the effect of preventing the challenged decision from
attaining finality. This is the reason why the second motion for reconsideration should present extraordinarily
persuasive reasons. Indeed, allowing pro forma motions would indefinitely avoid the assailed judgment from
attaining finality.
69

By granting PAL’s motion for leave to file a second motion for reconsideration, the Court effectively averted the July
22, 2008 decision and the October 2, 2009 resolution from attaining finality. Worthy of reiteration, too, is that the
March 13, 2012 resolution expressly recalled the September 7, 2011 resolution.

Given the foregoing, the conclusion stated in the dissent that the Banc was divested of the jurisdiction to entertain
the second motion for reconsideration for being a "third motion for reconsideration;"  and the unfair remark in the
70

dissent that "[t]he basis of the supposed residual power of the Court En Banc to, take on its own, take cognizance of
Division cases is therefore suspect"  are immediately rejected as absolutely legally and factually unfounded.
71

Labor II – 1
To start with, there was no "third motion for reconsideration" to speak of. The September 11, 2011 resolution
denying PAL’s second motion for reconsideration had been recalled by the October 4, 2011 resolution. Hence,
PAL’s motion for reconsideration remained unresolved, negating the assertion of the dissent that the Court was
resolving the second motion for reconsideration "for the second time." 72

Also, the dissent takes issue against our having assumed jurisdiction over G.R. No. 178083 despite the clear
reference made in the October 4, 2011 resolution to Sections 3(m) and (n), Rule 2 of the IRSC. Relying largely on
the Court's construction of Section 4(3), Article VIII of the 1987 Constitution in Fortich v. Corona,  the dissent opines
73

that the Banc could not act as an appellate court in relation to the decisions of the Division;  and that the Banc could
74

not take cognizance of any case in the Divisions except upon a prior consulta from the ruling Division pursuant to
Section 3(m), in relation to Section 3(1), Rule 2 of the IRSC. 75

The Court disagrees with the dissent’s narrow view respecting the residual powers of the Banc.

Fortich v. Corona, which has expounded on the authority of the Banc to accept cases from the Divisions, is still the
prevailing jurisprudence regarding the construction of Section 4(3), Article VIII of the 1987 Constitution.
However, Fortich v. Corona does not apply herein. It is notable that Fortich v. Corona sprung from the results of the
voting on the motion for reconsideration filed by the Sumilao Farmers. The vote ended in an equally divided Division
("two-two"). From there, the Sumilao Farmers sought to elevate the matter to the Banc based on Section 4(3),
Article VIII because the required three-member majority vote was not reached. However, the factual milieu in Fortich
v. Corona is not on all fours with that in this case.

In the March 13, 2012 resolution, the Court recounted the exigencies that had prompted the Banc to take
cognizance of the matter, to wit:

On September 28, 2011, the Letters dated September 13 and 20, 2011 of Atty. Mendoza to Atty. Vidal (asking that
his inquiry be referred to the relevant Division Members who took part on the September 7, 2011 Resolution) were
"NOTED" by the regular Second Division. The Members of the ruling Division also met to consider the queries
posed by Atty. Mendoza. Justice Brion met with the Members of the ruling Division (composed of Justices Brion,
Peralta, Perez, Bersamin, and Mendoza), rather than with the regular Second Division (composed of Justices
Carpio, Brion, Perez, and Sereno), as the former were the active participants in the September 7, 2011 Resolution.

In these meetings, some of the Members of the ruling Division saw the problems pointed out above, some of which
indicated that the ruling Division might have had no authority to rule on the case. Specifically, their discussions
centered on the application of A.M. No. 99-8-09-SC for the incidents that transpired prior to the effectivity of the
IRSC, and on the conflicting rules under the IRSC - - Section 3, Rule 8 on the effects of inhibition and Section 7,
Rule 2 on the resolution of MRs.

A.M. No. 99-8-09-SC indicated the general rule that the re-raffle shall be made among the other Members of the
san1e Division who participated in rendering the decision or resolution and who concurred therein, which should
now apply because the ruling on the case is no longer final after the case had been opened for review on the merits.
In other words, after acceptance by the Third Division, through Justice Velasco, of the 2nd MR, there should have
been a referral to raffle because the excepting qualification that the Clerk of Court cited no longer applied; what was
being reviewed were the merits of the case and the review should be by the same Justices who had originally
issued the original Decision and the subsequent Resolution, or by whoever of these Justices are still left in the
Court, pursuant to the same A.M. No. 99-8-09- SC.

On the other hand, the raffle to Justice Brion was made by applying AC No. 84-2007 that had been superseded by
Section 3, Rule 8 of the IRSC. Even the use of this IRSC provision, however, would not solve the problem, as its
use still raised the question of the provision that should really apply in the resolution of the MR: should it be Section
3, Rule 8 on the inhibition of a Member-in-Charge, or Section 7, Rule 2 of the IRSC on the inhibition of
the ponente when an MR of a decision and a signed resolution was filed. xxx

x x x           x x x          x x x

Labor II – 1
A comparison of these two provisions shows the semantic sources of the seeming conflict: Section 7, Rule 2 refers
to a situation where the ponente has retired, is no longer a Member of the Court, is disqualified, or has inhibited
himself from acting on the case; while Section 3, Rule 8 generally refers to the inhibition of a Member-in-Charge
who does not need to be the writer of the decision or resolution under review.

Significantly, Section 7, Rule 2 expressly uses the word ponente (not Member-in-Charge) and refers to a specific
situation where the ponente (or the writer of the Decision or the Resolution) is no longer with the Court or is
otherwise unavailable to review the decision or resolution he or she wrote. Section 3, Rule 8, on the other hand,
expressly uses the term Member-in-Charge and generally refers to his or her inhibition, without reference to the
stage of the proceeding when the inhibition is made.

Under Section 7, Rule 2, the case should have been re-raffled and assigned to anyone of Justices Nachura (who
did not retire until June 13, 2011), Peralta, or Bersamin, either (1) after the acceptance of the 2nd MR (because the
original rulings were no longer final); or (2) after Justice Velasco's inhibition because the same condition
existed, i.e., the need for a review by the same Justices who rendered the decision or resolution. As previously
mentioned, Justice Nachura participated in both the original Decision and the subsequent Resolution, and all three
Justices were the remaining Members who voted on the October 2, 2009 Resolution. On the other hand, if Section
3, Rule 8 were to be solely applied after Justice Velasco' s inhibition, the Clerk of Court would be correct in her
assessment and the raffle to Justice Brion, as a Member outside of Justice Velasco’s Division, was correct.

These were the legal considerations that largely confronted the ruling Division in late September 2011 when it
deliberated on what to do with Atty. Mendoza’s letters.

The propriety of and grounds for

the recall of the September 7,

2011 Resolution

Most unfortunately, the above unresolved questions were even further compounded in the course of the
deliberations of the Members of the ruling Division when they were informed that the parties received the ruling on
September 19, 2011, and this ruling would lapse to finality after the 15th day, or after October 4, 2011.

Thus, on September 30, 2011 (a Friday), the Members went to Chief Justice Corona and recommended, as a
prudent move, that the September 7, 2011 Resolution be recalled at the very latest on October 4, 2011, and that the
case be referred to the Court en bane for a ruling on the questions Atty. Mendoza asked. The consequence, of
course, of a failure to recall their ruling was for that Resolution to lapse to finality. After finality, any recall for lack of
jurisdiction of the ruling Division might not be understood by the parties and could lead to a charge of flip-flopping
against the Court. The basis for the referral is Section 3(n), Rule 2 of the IRSC, which provides:

RULE 2.

OPERATING STRUCTURES

Section 3. Court en bane matters and eases.-The Court en bane shall act on the following matters and cases:

xxxx

(n) cases that the Court en bane deems of sufficient importance to merit its attention[.]"

Ruling positively, the Court en bane duly issued its disputed October 4, 2011 Resolution recalling the September 7,
2011 Resolution and ordering the re-raffle of the case to a new Member-in-Charge. Later in the day, the Court
received PAL's Motion to Vacate (the September 7, 2011 ruling) dated October 3, 2011. This was followed by
FASAP's MR dated October 17, 2011 addressing the Court Resolution of October 4, 2011. The F ASAP MR mainly
invoked the violation of its right to due process as the recall arose from the Court’s ex parte consideration of mere
letters from one of the counsels of the parties.

Labor II – 1
As the narration in this Resolution shows, the Court acted on its own pursuant to its power to recall its own orders
and resolutions before their finality. The October 4, 2011 Resolution was issued to determine the propriety of the
September 7, 2011 Resolution given the facts that came to light after the ruling Division’s examination of the
records. To point out the obvious, the recall was not a ruling on the merits and did not constitute the reversal of the
substantive issues already decided upon by the Court in the F ASAP case in its previously issued Decision (of July
22, 2008) and Resolution (of October 2, 2009). In short, the October 4, 2011 Resolution was not meant and was
never intended to favor either party, but to simply remove any doubt about the validity of the ruling Division's action
on the case. The case, in the ruling Division's view, could be brought to the Court en banc since it is one of
"sufficient importance"; at the very least, it involves the interpretation of conflicting provisions of the IRSC with
potential jurisdictional implications.

At the time the Members of the ruling Division went to the Chief Justice to recommend a recall, there was no clear
indication of how they would definitively settle the unresolved legal questions among themselves. The only matter
legally certain was the looming finality of the September 7, 2011 Resolution if it would not be immediately recalled
by the Court en bane by October 4, 2011. No unanimity among the Members of the ruling Division could be
gathered on the unresolved legal questions; thus, they concluded that the matter is best determined by the Court en
bane as it potentially involved questions of jurisdiction and interpretation of conflicting provisions of the IRSC. To the
extent of the recommended recall, the ruling Division was unanimous and the Members communicated this intent to
the Chief Justice in clear and unequivocal terms.  (Bold scoring supplied for emphasis)
76

It is well to stress that the Banc could not have assumed jurisdiction were it not for the initiative of Justice Arturo V.
Brion who consulted the Members of the ruling Division as well as Chief Justice Corona regarding the jurisdictional
implications of the successive retirements, transfers, and inhibitions by the Members of the ruling Division. This
move by Justice Brion led to the referral of the case to the Banc in accordance with Section 3(1), Rule 2 of the IRSC
that provided, among others, that any Member of the Division could request the Court En Banc to take cognizance
of cases that fell under paragraph (m). This referral by the ruling Division became the basis for the Banc to issue its
October 4, 2011 resolution.

For sure, the Banc, by assuming jurisdiction over the case, did not seek to act as appellate body in relation to the
acts of the ruling Division, contrary to the dissent's position.77 The Bane's recall of the resolution of September 7,
2011 should not be so characterized, considering that the Banc did not thereby rule on the merits of the case, and
did not thereby reverse the July 22, 2008 decision and the October 2, 2009 resolution. The referral of the case to
the Banc was done to address the conflict among the provisions of the IRSC that had potential jurisdictional
implications on the ruling made by the Second Division.

At any rate, PAL constantly raised in its motions for reconsideration that the ruling Division had seriously erred not
only in ignoring the consistent findings about its precarious financial situation by the Labor Arbiter, the NLRC, the
CA and the SEC, but also in disregarding the pronouncements by the Court of its serious fiscal condition. To be
clear, because the serious challenge by PAL against the ruling of the Third Division was anchored on the Third
Division’s having ignored or reversed settled doctrines or principles of law, only the Banc could assume jurisdiction
and decide to either affirm, reverse or modify the earlier decision. The rationale for this arrangement has been
expressed in Lu v. Lu Ym  thuswise:
78

It is argued that the assailed Resolutions in the present cases have already become final, since a second motion for
reconsideration is prohibited except for extraordinarily persuasive reasons and only upon express leave first
obtained; and that once a judgment attains finality, it thereby becomes immutable and unalterable, however unjust
the result of error may appear.

The contention, however, misses an important point. The doctrine of immutability of decisions applies only to final
and executory decisions. Since the present cases may involve a modification or reversal of a Court-ordained
doctrine or principle, the judgment rendered by the Special Third Division may be considered unconstitutional,
hence, it can never become final. It finds mooring in the deliberations of the framers of the Constitution:

On proposed Section 3(4), Commissioner Natividad asked what the effect would be of a decision that violates
the proviso that "no doctrine or principle of law laid down by the court in a decision rendered en bane or in division
may be modified or reversed except by the court en bane." The answer given was that such a decision would be
invalid. Following up, Father Bernas asked whether the decision, if not challenged, could become final and binding
Labor II – 1
at least on the parties. Romulo answered that, since such a decision would be in excess of jurisdiction, the
decision on the case could be reopened anytime. (emphasis and underscoring supplied)

A decision rendered by a Division of this Court in violation of this constitutional provision would be in excess of
jurisdiction and, therefore, invalid. Any entry of judgment may thus be said to be "inefficacious" since the decision is
void for being unconstitutional.

While it is true that the Court en bane exercises no appellate jurisdiction over its Divisions, Justice Minerva
Gonzaga-Reyes opined in Firestone and concededly recognized that "[t]he only constraint is that any doctrine or
principle of law laid down by the Court, either rendered en bane or in division, may be overturned or reversed only
by the Court sitting en banc."

That a judgment must become final at some definite point at the risk of occasional error cannot be appreciated in a
case that embroils not only a general allegation of "occasional error" but also a serious accusation of a violation of
the Constitution, viz., that doctrines or principles of law were modified or reversed by the Court's Special Third
Division August 4, 2009 Resolution.

The law allows a determination at first impression that a doctrine or principle laid down by the court en bane or in
division may be modified or reversed in a case which would warrant a referral to the Court En Banc. The use of the
word "may" instead of "shall" connotes probability, not certainty, of modification or reversal of a doctrine, as may be
deemed by the Court. Ultimately, it is the entire Court which shall decide on the acceptance of the referral and, if so,
"to reconcile any seeming conflict, to reverse or modify an earlier decision, and to declare the Court's doctrine."

The Court has the power and prerogative to suspend its own rules and to exempt a case from their operation if and
when justice requires it, as in the present circumstance where movant filed a motion for leave after the prompt
submission of a second motion for reconsideration but, nonetheless, still within 15 days from receipt of the last
assailed resolution.79

Lastly, the dissent proposes that a unanimous vote is required to grant PAL’s Second Motion for Reconsideration of
the Decision of July 22, 2008.  The dissent justifies the proposal by stating that "[a] unanimous court would debate
80

and deliberate more fully compared with a non-unanimous court. " 81

The radical proposal of the dissent is bereft of legal moorings. Neither the 1987 Constitution nor the IRSC demands
such unanimous vote. Under Section 4(2), Article VIII of the 1987 Constitution, decisions by the Banc shall be
attained by a "concurrence of a majority of the Members who actually took part in the deliberations on the issues in
the case and voted thereon." As a collegial body, therefore, the Court votes after deliberating on the case, and only
a majority vote is required,  unless the 1987 Constitution specifies otherwise. In all the deliberations by the Court,
82

dissenting and concurring opinions are welcome, they being seen as sound manifestations of "the license of
individual Justices or groups of Justices to separate themselves from "the Court’s" adjudication of the case before
them,"  thus:
83

[C]oncurring and dissenting opinions serve functions quite consistent with a collegial understanding of the Court.
Internally within the Court itself---dissent promotes and improves deliberation and judgment. Arguments on either
side of a disagreement test the strength of their rivals and demand attention and response. The opportunity for
challenge and response afforded by the publication of dissenting and concurring opinions is a close and
sympathetic neighbor of the obligation of reasoned justification.

Externally for lower courts, the parties, and interested bystanders-concurring and dissenting opinions are important
guides to the dynamic "meaning" of a decision by the Court. From a collegial perspective, dissenting and concurring
opinions offer grounds for understanding how individual Justices, entirely faithful to their Court's product, will
interpret that product. The meaning each Justice brings to the product of her Court will inevitably be shaped by
elements of value and judgment she brings to the interpretive endeavor; her dissent from the Court's conclusions in
the case in question is likely to be dense with insight into these aspects of her judicial persona.
84

III

Labor II – 1
 PAL implemented a valid retrenchment program

Retrenchment or downsizing is a mode of terminating employment initiated by the employer through no fault of the
employee and without prejudice to the latter, resorted to by management during periods of business recession,
industrial depression or seasonal fluctuations or during lulls over shortage of materials. It is a reduction in
manpower, a measure utilized by an employer to minimize business losses incurred in the operation of its
business.85

Anent retrenchment, Article 298  of the Labor Code provides as follows:

86

Article 298. Closure of Establishment and Reduction of Personnel. - The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry
of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the
installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closure 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.

Accordingly, the employer may resort to retrenchment in order to avert serious business losses. To justify such
retrenchment, the following conditions must be present, namely:

1. The retrenchment must be reasonably necessary and likely to prevent business losses;

2. The losses, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or, if
only expected, are reasonably imminent;

3. The expected or actual losses must be proved by sufficient and convincing evidence;

4. The retrenchment must be in good faith for the advancement of its interest and not to defeat or circumvent
the employees' right to security of tenure; and

5. There must be fair and reasonable criteria m 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. 87

Based on the July 22, 2008 decision, PAL failed to: (1) prove its financial losses because it did not submit its audited
financial statements as evidence; (2) observe good faith in implementing the retrenchment program; and (3) apply a
fair and reasonable criteria in selecting who would be terminated.

Upon a critical review of the records, we are convinced that PAL had met all the standards in effecting a valid
retrenchment.

PAL’s serious financial losses were duly established

PAL was discharged of the

| burden to prove serious
| financial losses in view of
| F ASAP's admission

Labor II – 1
PAL laments the unfair and unjust conclusion reached in the July 22, 2008 decision to the effect that it had not
proved its financial losses due to its non-submission of audited financial statements. It points out that the matter of
financial losses had not been raised as an issue before the Labor Arbiter, the NLRC, the CA, and even in the
petition in G.R. No. 178083 in view of FASAP’s admission of PAL having sustained serious losses; and that PAL’s
having been placed under rehabilitation sufficiently indicated the financial distress that it was suffering.

It is quite notable that the matter of PAL’s financial distress had originated from the complaint filed by F ASAP
whereby it raised the sole issue of "Whether or not respondents committed Unfair Labor Practice."  F ASAP 88

believed that PAL, in terminating the 1,400 cabin crew members, had violated Section 23, Article VII and Section 31,
Article IX of the 1995- 2000 P AL-FASAP CBA. Interestingly, FASAP averred in its position paper therein that it was
not opposed to the retrenchment program because it understood PAL’s financial troubles; and that it was only
questioning the manner and lack of standard in carrying out the retrenchment, thus:

At the outset, it must be pointed out that complainant was never opposed to the retrenchment program itself, as it
understands respondent PAL’s financial troubles. In fact, complainant religiously cooperated with respondents in
their quest for a workable solution to the company-threatening problem. Attached herewith as Annexes "A" to "D"
are the minutes of its meetings with respondent PAL’s representatives showing complainant's active participation in
the deliberations on the issue.

What complainant vehemently objects to are the manner and the lack of criteria or standard by which the
retrenchment program was implemented or carried out, despite the fact that there are available criteria or standard
that respondents could have utilized or relied on in reducing its workforce. In adopting a retrenchment program that
was fashioned after the evil prejudices and personal biases of respondent Patria Chiong, respondent PAL grossly
violated at least two important provisions of its CBA with complainant - Article VII, Section 23 and Article IX,
Sections 31and 32. 89

These foregoing averments of F ASAP were echoed in its reply  and memorandum  submitted to the Labor Arbiter.
90 91

Evidently, FASAP’s express recognition of PAL’s grave financial situation meant that such situation no longer
needed to be proved, the same having become a judicial admission  in the context of the issues between the
92

parties. As a rule, indeed, admissions made by parties in the pleadings, or in the course of the trial or other
proceedings in the same case are conclusive, and do not require further evidence to prove them.  By FASAP’s
93

admission of PAL’s severe financial woes, PAL was relieved of its burden to prove its dire financial condition to
justify the retrenchment. Thusly, PAL should not be taken to task for the non-submission of its audited financial
statements in the early part of the proceedings inasmuch as the non-submission had been rendered irrelevant.

Yet, the July 22, 2008 decision ignored the judicial admission and unfairly focused on the lack of evidence of PAL’s
financial losses. The Special Third Division should have realized that PAL had been discharged of its duty to prove
its precarious fiscal situation in the face of FASAP’s admission of such situation. Indeed, PAL did not have to submit
the audited financial statements because its being in financial distress was not in issue at all.

Nonetheless, the dissent still insists that PAL should be faulted for failing to prove its substantial business losses,
and even referred to several decisions of the Court  wherein the employers had purportedly established their
94

serious business losses as a requirement for a valid retrenchment.

Unfortunately, the cases cited by the dissent obviously had no application herein because they originated from
either simple complaints of illegal retrenchment, or unfair labor practice, or additional separation pay. 95

LVN Pictures originated from a complaint for unfair labor practice (ULP) based on Republic Act No. 874 (Industrial
Peace Act). The allegations in the complaint concerned interference, discrimination and refusal to bargain
collectively. The Court pronounced therein that the employer (L VN Pictures) did not resort to ULP because it was
able to justify its termination, closure and eventual refusal to bargain collectively through the financial statements
showing that it continually incurred serious financial losses. Notably, the Court did not interfere with the closure and
instead recognized LVN’s management prerogative to close its business and dismiss its employees.

Labor II – 1
North Davao Mining was a peculiar case, arising from a complaint for additional separation pay, among others. The
Court therein held that separation pay was not required if the reason for the termination was due to serious business
losses. It clarified that Article 283 (now Art. 298) governed payment of separation benefits in case of closure of
business not due to serious business losses. When the reason for the closure was serious business losses, the
employer shall not be required to grant separation pay to the terminated employees.

In Manatad, the complaint for illegal dismissal was based on the allegation that the retrenchment program was
illegal because the employer was gaining profits. Hence, the core issue revolved around the existence (or absence)
of grave financial losses that would justify retrenchment.

In the cited cases, the employers had to establish that they were incurring serious business losses because it was
the very issue, if not intricately related to the main issue presented in the original complaints. In contrast, the sole
issue herein as presented by F ASAP to the Labor Arbiter was the "manner of retrenchment," not the basis for
retrenchment. F ASAP itself, in representation of the retrenched employees, had admitted in its position paper, as
well as in its reply and memorandum submitted to the Labor Arbiter the fact of serious financial losses hounding
PAL. In reality, PAL was not remiss by not proving serious business losses. FASAP’s admission of PAL’s financial
distress already established the latter's precarious financial state.

Judicial notice could be taken

of the financial losses
incurred; the presentation of
audited financial statements
was not required in such
circumstances

The July 22, 2008 decision recognized that PAL underwent corporate rehabilitation. In seeming inconsistency,
however, the Special Third Division refused to accept that PAL had incurred serious financial losses, observing
thusly:

The audited financial statements should be presented before the Labor Arbiter who is in the position to
evaluate evidence. They may not be submitted belatedly with the Court of Appeals, because the admission of
evidence is outside the sphere of the appellate court's certiorari jurisdiction. Neither can this Court admit in evidence
audited financial statements, or make a ruling on the question of whether the employer incurred substantial losses
justifying retrenchment on the basis thereof, as this Court is not a trier of facts. Even so, this Court may not be
compelled to accept the contents of said documents blindly and without thinking.

xxxx

In the instant case, PAL failed to substantiate its claim of actual and imminent substantial losses which would justify
the retrenchment of more than 1,400 of its cabin crew personnel. Although the Philippine economy was gravely
affected by the Asian financial crisis, however, it cannot be assumed that it has likewise brought PAL to the
brink of bankruptcy. Likewise, the fact that PAL underwent corporate rehabilitation does not automatically
justify the retrenchment of its cabin crew personnel.  (Emphasis supplied)
96

Indeed, that a company undergoes rehabilitation sufficiently indicates its fragile financial condition. lt is rather
unfortunate that when PAL petitioned for rehabilitation the term "corporate rehabilitation" still had no clear definition.
Presidential Decree No. 902-A,  the law then applicable, only set the remedy.  Section 6(c) and (d) of P.D. No. 902-
97 98

A gave an insight into the precarious state of a distressed corporation requiring the appointment of a receiver or the
creation of a management committee, viz.:

xxxx

c) To appoint one or more receivers of the property, real and personal, which is the subject of the action pending
before the Commission in accordance with the pertinent provisions of the Rules of Court in such other cases
whenever necessary in order to preserve the rights of the parties-litigants and/or protect the interest of the
investing public and creditors: Provided, however, That the Commission may, in appropriate cases, appoint a

Labor II – 1
rehabilitation receiver of corporations, partnerships or other associations not supervised or regulated by other
government agencies who shall have, in addition to the powers of a regular receiver under the provisions of the
Rules of Court, such functions and powers as are provided for in the succeeding paragraph d)
hereof: Provided, further, That the Commission may appoint a rehabilitation receiver of corporations, partnerships or
other associations supervised or regulated by other government agencies, such as banks and insurance
companies, upon request of the government agency concerned: Provided, finally, That upon appointment of a
management committee, rehabilitation receiver, board or body, pursuant to this Decree, all actions for
claims against corporations, partnerships or associations under management or receivership pending
before any court, tribunal, board or body shall be suspended accordingly.

d) To create and appoint a management committee, board, or body upon petition or moto propio to undertake the
management of corporations, partnerships or other associations not supervised or regulated by other government
agencies in appropriate cases when there is imminent danger of dissipation, loss, wastage or destruction of
assets or other properties of paralyzation of business operations of such corporations or entities which
may be prejudicial to the interest of minority stockholders, parties-litigants or the general public: Provided,
further, That the Commission may create or appoint a management committee, board or body to undertake the
management of corporations, partnerships or other associations supervised or regulated by other government
agencies, such as banks and insurance companies, upon request of the government agency concerned.

The management committee or rehabilitation receiver, board or body shall have the power to take custody of, and
control over, all the existing assets and property of such entities under management; to evaluate the existing assets
and liabilities, earnings and operations of such corporations, partnerships or other associations; to determine the
best way to salvage and protect the interest of the investors and creditors; to study, review and evaluate the
feasibility of continuing operations and restructure and rehabilitate such entities if determined to be feasible by the
Commission. It shall report and be responsible to the Commission until dissolved by order of the Commission:
Provided, however, That the Commission may; on the basis of the findings and recommendation of the
management committee, or rehabilitation receiver, board or body, or on its own findings; determine that the
continuance in business of such corporation or entity would not be feasible or profitable nor work to the
best interest of the stockholders, parties-litigants, creditors, or the general public, order the dissolution of
such corporation entity and its remaining assets liquidated accordingly. The management committee or
rehabilitation receiver, board or body may overrule or revoke the actions of the previous management and board of
directors of the entity or entities under management notwithstanding any provision of law, articles of incorporation or
by-laws to the contrary.

The management committee, or rehabilitation receiver, board or body shall not be subject to any action, claim or
demand for, or in connection with, any act done or omitted to be done by it in good faith in the exercise of its
functions, or in connection with the exercise of its power herein conferred. (Bold underscoring supplied for
emphasis)

After having been placed under corporate rehabilitation and its rehabilitation plan having been approved by the SEC
on June 23, 2008, PAL’s dire financial predicament could not be doubted. Incidentally, the SEC’s order of approval
came a week after PAL had sent out notices of termination to the affected employees. It is thus difficult to ignore the
fact that PAL had then been experiencing difficulty in meeting its financial obligations long before its rehabilitation.

Moreover, the fact that airline operations were capital intensive but earnings were volatile because of their
vulnerability to economic recession, among others.  The Asian financial crisis in 1997 had wrought havoc among
99

the Asian air carriers, PAL included.  The peculiarities existing in the airline business made it easier to believe that
100

at the time of the Asian financial crisis, PAL incurred liabilities amounting to ₱90,642,933,919.00, which were way
beyond the value of its assets that then only stood at ₱85,109,075,35l.

Also, the Court cannot be blind and indifferent to current events affecting the society  and the country’s
101

economy,  but must take them into serious consideration in its adjudication of pending cases. In that regard,
102

Section 2, Rule 129 of the Rules of Court recognizes that the courts have discretionary authority to take judicial
notice of matters that are of public knowledge, or are capable of unquestionable demonstration, or ought to be
known to judges because of their judicial functions.  The principle is based on convenience and expediency in
103

securing and introducing evidence on matters that are not ordinarily capable of dispute and are not bona
fide disputed. 104

Labor II – 1
Indeed, the Labor Arbiter properly took cognizance of PAL’s substantial financial losses during the Asian financial
crisis of 1997.  On its part, the NLRC recognized the grave financial distress of PAL based on its ongoing
105

rehabilitation/receivership.  The CA likewise found that PAL had implemented a retrenchment program to counter
106

its tremendous business losses that the strikes of the pilot's union had aggravated.  Such recognitions could not be
107

justly ignored or denied, especially after PAL's financial and operational difficulties had attracted so much public
attention that even President Estrada had to intervene in order to save PAL as the country’s flag carrier. 108

The Special Third Division also observed that PAL had submitted a "stand-alone" rehabilitation program that was
viewed as an acknowledgment that it could "undertake recovery on its own and that it possessed enough resources
to weather the financial storm." The observation was unfounded considering that PAL -had been constrained to
submit the "stand-alone" rehabilitation plan on December 7, 1998 because of the lack of a strategic partner. 109

We emphasize, too, that the presentation of the audited financial statements should not the sole means by Which to
establish the employer's serious financial losses. The presentation of audited financial statements, although
convenient in proving the unilateral claim of financial losses, is not required for all cases of retrenchment. The
evidence required for each case of retrenchment really depends on the particular circumstances obtaining. The
Court has cogently opined in that regard:

That petitioners were not able to present financial statements for years prior to 2005 should not be automatically
taken against them. Petitioner BEMI was organized and registered as a corporation in 2004 and started business
operations in 2005 only. While financial statements for previous years may be material in establishing the
financial trend for an employer, these are not indispensable in all cases of retrenchment. The evidence
required for each case of retrenchment will still depend on its particular circumstances. In fact, in Revidad
v. National Labor Relations Commission, the Court declared that "proof of actual financial losses incurred
by the company is not a condition sine qua non for retrenchment," and retrenchment may be undertaken by
the employer to prevent even future losses:

In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or termination of the services of
some employees is authorized to be undertaken by the employer sometime before the anticipated losses are
actually sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to stay
his hand and keep all his employees until after losses shall have in fact materialized. If such an intent were
expressly written into the law, that law may well be vulnerable to constitutional attack as unduly taking property from
one man to be given to another.  (Bold underscoring supplied for emphasis)
110

In short, to require a distressed corporation placed under rehabilitation or receivership to still submit its
audited financial statements may become unnecessary or superfluous.

Under P.D. No. 902-A, the SEC was empowered during rehabilitation proceedings to thoroughly review the
corporate and financial documents submitted by PAL. Hence, by the time when the SEC ordered PAL’s
rehabilitation, suspension of payments and receivership, the SEC had already ascertained PAL’s serious financial
condition, and the clear and imminent danger of its losing its corporate assets. To require PAL in the proceedings
below to still prove its financial losses would only trivialize the SEC’s order and proceedings. That would be
unfortunate because we should not ignore that the SEC was then the competent authority to determine whether or
not a corporation experienced serious financial losses. Hence, the SEC's order - presented as evidence in the
proceedings below - sufficiently established PAL’s grave financial status.

Finally, PAL argues that the Special Third Division should not have deviated from the pronouncements made
in Garcia v. Philippine Airlines, Inc., Philippine Airlines, Inc. v. Kurangking, Philippine Airlines v. Court of Appeals,
Philippine Airlines v. Zamora, Philippine Airlines v. PALEA, and Philippine Airlines v. National Labor Relations
Commission, all of which judicially recognized PAL’s dire financial condition.

The argument of PAL is valid and tenable.

Garcia v. Philippine Airlines, Inc. discussed the unlikelihood of reinstatement pending appeal because PAL had
been placed under corporate rehabilitation, explaining that unlike the ground of substantial losses contemplated in a
retrenchment case, the state of corporate rehabilitation was judicially pre-determined by a competent court and not
formulated for the first time by the employer, viz.:
Labor II – 1
While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of
the dismissed employee and his family, it does not contemplate the period when the employer-corporation itself is
similarly in a judicially monitored state of being resuscitated in order to survive.

The parallelism between a judicial order of corporation rehabilitation as a justification for the non-exercise of its
options, on the one hand, and a claim of actual and imminent substantial losses as ground for retrenchment, on the
other hand, stops at the red line on the financial statements. Beyond the analogous condition of financial gloom, as
discussed by Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike the ground
of substantial losses contemplated in a retrenchment case, the state of corporate rehabilitation was judicially pre-
determined by a competent court and not formulated for the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order placing a corporation under rehabilitation.
Respondent was, during the period material to the case, effectively deprived of the alternative choices under Article
223 of the Labor Code, not only by virtue of the statutory injunction but also in view of the interim relinquishment of
management control to give way to the full exercise of the powers of the rehabilitation receiver. Had there been no
need to rehabilitate, respondent may have opted for actual physical reinstatement pending appeal to optimize the
utilization of resources. Then again, though the management may think this wise, the rehabilitation receiver may
decide otherwise, not to mention the subsistence of the injunction on claims. 111

In Philippine Airlines v. Kurangking; Philippine Airlines v. Court of Appeals, Philippine Airlines v.

PALEA and Philippine Airlines v. National Labor Relations Commission, the Court uniformly upheld the suspension
of monetary claims against PAL because of the SEC’s order placing it under receivership. The Court emphasized
the need to suspend the payment of the claims pending the rehabilitation proceedings in order to enable the
management committee/receiver to channel the efforts towards restructuring and rehabilitation. Philippine Airlines v.
Zamora reiterated this rule and deferred to the prior judicial notice taken by the Court in suspending the monetary
claims of illegally dismissed employees. 112

Through these rulings, the Court consistently recognized PAL’s financial troubles while undergoing rehabilitation
and suspension of payments. Considering that the ruling related to conditions and circumstances that had occurred
during the same period as those obtaining in G.R. No. 178083, the Court cannot take a different view.

It is also proper to indicate that the Court decided the other cases long before the promulgation of the assailed July
22, 2008 decision. Hence, the Special Third Division should not have regarded the financial losses as an issue that
still required determination. Instead, it should have just simply taken judicial notice of the serious financial losses
being suffered by PAL.  To still rule that PAL still did not prove such losses certainly conflicted with the antecedent
113

judicial pronouncements about PAL’s dire financial state.

As such, we cannot fathom the insistence by the dissent that the Court had not taken judicial notice but merely
"recognized" that PAL was under corporate rehabilitation. Judicial notice is the cognizance of certain facts that
judges may properly take and act on without proof because they already know them. It is the manner of recognizing
and acknowledging facts that no longer need to be proved in court. In other words, when the Court "recognizes" a
fact, it inevitably takes judicial notice of it.

For sure, it would not have been the first time that the Court would have taken judicial notice of the findings of the
SEC and of antecedent jurisprudence recognizing the fact of rehabilitation by the employer. The Court did so in the
2002 case of Clarion Printing House, Inc. v. National Labor Relations Commission,   to wit:
114

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

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

Labor II – 1
 x x x           x x x          x x x

(d) Petitions of corporations, partnerships or associations declared in the state of suspension of

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

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

x x x           x x x          x x x

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

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

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

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

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

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

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

Labor II – 1
WHEREFORE, premises considered, the appeal is as it is hereby, granted and the Order dated 18 December 1998
is set aside. The Petition to be Declared in State of Suspension of payments is hereby disapproved and the SAC
Plan terminated. Consequently, all committee, conservator/receivers created pursuant to said Order are dissolved
and discharged and all acts and orders issued therein are vacated.

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

x x x           x x x          x x x (Emphasis and underscoring supplied),

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

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

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

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

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

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

In fine, CLARION's claim that at the time it terminated Miclat it was experiencing business reverses gains more light
from the SEC's disapproval of the EYCO Group of Companies' petition to be declared in state of suspension of
payment, filed before Miclat’stermination, and of the SEC’s consequent order for the group of companies’
dissolution and liquidation.115

At any rate, even assuming that serious business losses had not been proved by PAL, it would still be justified under
Article 298 of the Labor Code to retrench employees to prevent the occurrence of losses or its closing of the
business, provided that the projected losses were not merely de minimis, but substantial, serious, actual, and real,
or, if only expected, were reasonably imminent as perceived objectively and in good faith by the employer.  In the
116

latter case, proof of actual financial losses incurred by the employer would not be a condition sine qua non for
retrenchment,  viz.:
117

Third, contrary to petitioner’s asseverations, proof of actual financial losses incurred by the company is not a
condition sine qua non for retrenchment. Retrenchment is one of the economic grounds to dismiss employees,
which is resorted to by an employer primarily to avoid or minimize business losses. The law recognize this under
Article 283 of the Labor Code x x x

xxxx

In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or termination of the services of
some employees is authorized to be undertaken by the employer sometime before the anticipated losses are
Labor II – 1
actually sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to stay
his hand and keep all his employees until after losses shall have in fact materialized. If such an intent were
expressly written into the law, that law may well be vulnerable to constitutional attack as unduly taking property from
one man to be given to another.

At the other end of the spectrum, it seems equally clear that not every asserted possibility of loss is sufficient legal
warrant for the reduction of personnel. In the nature of things, the possibility of incurring the losses is constantly
present, in greater or lesser degree, in the carrying on of business operations, since some, indeed many, of the
factors which impact upon the profitability or viability of such operations may be substantially outside the control of
the employer.

On the bases of these consideration, it follows that the employer bears the burden to prove his allegation of
economic or business reverses with clear and satisfactory evidence, it being in the nature of an affirmative defense.
As earlier discussed, we are fully persuaded that the private respondent has been and is besieged by a continuing
downtrend in both its business operations and financial resources, thus amply justifying its resort to drastic cuts in
personnel and costs. 118

PAL retrenched in good faith

The employer is burdened to observe good faith in implementing a retrenchment program. Good faith on its part
exists when the retrenchment is intended for the advancement of its interest and is not for the purpose of defeating
or circumventing the rights of the employee under special laws or under valid agreements. 119

The July 22, 2008 decision branded the recall of the retrenched employees and the implementation of "Plan 22"
instead of "Plan 14" as badges of bad faith on the part of PAL. On the other hand, the October 2, 2009 resolution
condemned PAL for changing its theory by attributing the cause of the retrenchment to the ALP AP pilots’ strike.

PAL refutes the adverse observations, and maintains that its position was clear and consistent - that the reduction of
its labor force was an act of survival and a less drastic measure as compared to total closure and liquidation that
would have otherwise resulted; that downsizing had been an option to address its financial losses since 1997;  that120

the reduction of personnel was necessary as an integral part of the means to ensure the success of its corporate
rehabilitation plan to restructure its business;  and that the downsizing of its labor force was a sound business
121

decision undertaken after an assessment of its financial situation and the remedies available to it. 122

A hard look at the records now impels the reconsideration of the July 22, 2008 decision and the resolution of
October 2, 2009.

PAL could not have been motivated by ill will or bad faith when it decided to terminate FASAP’s affected members.
On the contrary, good faith could be justly inferred from PAL’s conduct before, during and after the implementation
of the retrenchment plan.

Notable in this respect was PAL’s candor towards FASAP regarding its plan to implement the retrenchment
program. This impression is gathered from PAL’s letter dated February 11, 1998 inviting FASAP to a meeting to
discuss the matter, thus:

Roberto D. Anduiza
President

Flight Attendants’ and Stewards' Association of the Philippines (FASAP)

xxxx

Mr. Anduiza:

Labor II – 1
Due to critical business losses and in view of severe financial reverses, Philippine Airlines must undertake drastic
measures to strive at survival. In order to meet maturing obligations amidst the present regional crisis, the Company
will implement major cost-cutting measures in its fleet plan, operating budget, routes and frequencies. These moves
include the closure of stations, downsizing of operations and reducing the workforce through layoff/retrenchment or
retirement.

In this connection, the Company would like to meet with the Flight Attendants' and Stewards’ Association of the
Philippines (FASAP) to discuss the implementation of the lay-off/retrenchment or retirement of F ASAP-covered
employees. The meeting shall be at the Allied Bank Center (81h Floor-Board Room) on February 12, 1998 at 4:00
p.m.

This letter serves as notice in compliance with Article 283 of the Labor Code, as amended and DOLE Orders Nos[.]
9 and 10, Series of 1997.

Very truly yours,

(Sgd.)
JOSE ANTONIO GARCIA
President & Chief Operating Officer 123

The records also show that the parties met on several occasions  to explore cost-cutting measures, including the
124

implementation of the retrenchment program. PAL likewise manifested that the retrenchment plan was temporarily
shelved while it implemented other measures (like termination of probationary cabin attendant, and work-
rotations).  Obviously, the dissent missed this part as it stuck to the belief that PAL did not implement other cost-
125

cutting measures prior to retrenchment. 126

Given PAL’s dire financial predicament, it becomes understandable that PAL was constrained to finally implement
the retrenchment program when the ALPAP pilots strike crippled a major part of PAL’s operations.  In Rivera v.
127

Espiritu,   we observed that said strike wrought "serious losses to the financially beleaguered flag
128

carrier;" that "PAL’s financial situation went from bad to worse;" and that "[f]aced with bankruptcy, PAL adopted a
rehabilitation plan and downsized its labor force by more than one-third." Such observations sufficed to show that
retrenchment became a last resort, and was not the rash and impulsive decision that F ASAP would make it out to
be now.

As between maintaining the number of its flight crew and PAL’s survival, it was reasonable for PAL to choose the
latter alternative. This Court cannot legitimately force PAL as a distressed employer to maintain its manpower
despite its dire financial condition. To be sure, the right of PAL as the employer to reasonable returns on its
investments and to expansion and growth is also enshrined in the 1987 Constitution.  Thus, although labor is
129

entitled to the right to security of tenure, the State will not interfere with the employer's valid exercise of its
management prerogative.

Moreover, PAL filed its Petition for Appointment of Interim Rehabilitation Receiver and Approval of a Rehabilitation
Plan with the SEC on June 19, 1998, before the retrenchment became effective.  PAL likewise manifested that:
130

x x x The Rehabilitation Plan and Amended Rehabilitation Plan submitted by PAL in pursuance of its corporate
rehabilitation, and which obtained the joint approval of PAL’s creditors and the SEC, had as a primary component,
the downsizing of PAL’s labor force by at least 5,000, including the 1,400 flight attendants. As
conceptualized by a team of industry experts, the cutting down of operations and the consequent reduction
of work force, along with the restructuring of debts with significant "haircuts" and the capital infusion of Mr.
Lucio Tan amounting to US$200 million, were the key components of PAL's rehabilitation. The Interim
Rehabilitation Receiver was replaced by a Permanent Rehabilitation Receiver on June 7, 1999.  (Bold underscoring
131

supplies for emphasis)

Being under a rehabilitation program, PAL had no choice but to implement the measures contained in the program,
including that of reducing its manpower. Far from being an impulsive decision to defeat its employees’ right to
security of tenure, retrenchment resulted from a meticulous plan primarily aimed to resuscitate PAL’s operations.

Labor II – 1
Good faith could also be inferred from PAL’s compliance with the basic requirements under- Article 298 of the Labor
Code prior to laying-off its affected employees. Notably, the notice of termination addressed to the Department of
Labor and Employment (DOLE) identified the reasons behind the massive termination, as well as the measures PAL
had undertaken to prevent the situation, to wit:

June 15, 1998

HON. MAXIMO B. LIM

THE REGIONAL DIRECTOR
Department of Labor and Employment
Regional Office No. NCR

Dear Sir:

This is to inform you that Philippine Air Lines, Inc. (PAL) will be implementing a retrenchment program one (1)
month from notice hereof in order to prevent bankruptcy.

PAL is forced to take this action because of continuous losses it has suffered over the years which losses
were aggravated by the PALEA strike in October 1996, peso depreciation, Asian currency crisis, causing a
serious drop in our yield and the collapse of passenger traffic in the region. Specifically, PAL suffered a net
loss of ₱2.18 Billion during the fiscal year 1995-1996, ₱2.50 Billion during the fiscal year 1996-1997 and
₱8.08 Billion for the period starting April 1, 1997 to March 31, 1998.

These uncontrolled heavy losses have left PAL with no recourse but to reduce its fleet and its flight frequencies both
in the domestic and international sectors to ensure its survival.

In an effort to avoid a reduction of personnel, PAL has resorted to other measures, such as freeze on all hiring,
no salary increase for managerial and confidential staff (even for promotions), reduction of salaries of
senior management personnel, freeze on staff movements, pre-termination of temporary staff contracts and
negotiations with foreign investors. But all these measures failed to avert the continued losses.

Finally, all the efforts of PAL to preserve the employment of its personnel were shattered by the illegal strike
of its pilots which has cause irreparable damage to the company's cash flow. Consequently, the company is
now no longer able to meet its maturing obligations and is not about to go into default in all its major loans.
It is presently under threat of receiving a barrage of suits from its creditors who will go after the assets of
the corporation.

Under the circumstances, PAL is left with no recourse but to reduce its fleet and its flight frequencies both in the
domestic and international sectors to ensure its survival. Consequently, a reduction of personnel is inevitable.

All affected employees in the attached list will be given the corresponding benefits which they may be entitled to.

Very truly yours,

(Sgd)

JOSE ANTONIO GARCIA

President & Chief Operating Officer 132

As regards the observation made in the decision of July 22, 2008 to the effect that the recall of the flight crew
members indicated bad faith, we hold to the contrary.

PAL explained how the recall process had materialized, as follows:

Labor II – 1
During this time, the Company was slowly but steadily recovering. Its finances were improving and additional planes
were flying. Because of the Company's steady recovery, necessity dictated more employees to man and service the
additional planes and flights. Thus, instead of taking in new hires, the Company first offered employment to
employees who were previously retrenched. A recall/rehire plan was initiated.

The recall/rehire plan was a success. A majority of retrenched employees were recalled/rehired and went back to
work including the members of petitioner union. In the process of recall/rehire, many employees who could not be
recalled for various reasons (such as, among others, being unfit for the job or the employee simply did not want to
work for the Company anymore) decided to accept separation benefits and executed, willingly and voluntarily, valid
quitclaims. Those who received separation packages included a good number of the members of the petitioner
union. 133

Contrary to the statement in the dissent that the implementation of Plan 22 instead of Plan 14 indicated bad
faith,  PAL reasonably demonstrated that the recall was devoid of bad faith or of an attempt on its part to
134

circumvent its affected employees’ right to security of tenure. Far from being tainted with bad faith, the recall
signified PAL’s reluctance to part with the retrenched employees. Indeed, the prevailing unfavorable conditions had
only compelled it to implement the retrenchment.

The rehiring of previously retrenched employees should not invalidate a retrenchment program, the rehiring being
an exercise of the employer's right to continue its business. Thus, we pointed out in one case:

We likewise cannot sustain petitioners' argument that their dismissal was illegal on the basis that Lapanday did not
actually cease its operation, or that they have rehired some of the dismissed employees and even hired new set of
employees to replace the retrenched employees.

The law acknowledges the right of every business entity to reduce its workforce if such measure is made necessary
or compelled by economic factors that would otherwise endanger its stability or existence. In exercising its right to
retrench employees, the firm may choose to close all, or a part of, its business to avoid further losses or mitigate
expenses. In Caffco International Limited v. Office of the Minister-Ministry of Labor and Employment, the Court has
aptly observed that -

Business enterprises today are faced with the pressures of economic recession, stiff competition, and labor unrest.
Thus, businessmen are always pressured to adopt certain changes and programs in order to enhance their profits
and protect their investments. Such changes may take various forms. Management may even choose to close a
branch, a department, a plant, or a shop.

In the same manner, when Lapanday continued its business operation and eventually hired some of its retrenched
employees and new employees, it was merely exercising its right to continue its business. The fact that Lapanday
chose to continue its business does not automatically make the retrenchment illegal. We reiterate that in
retrenchment, the goal is to prevent impending losses or further business reversals - it therefore does not require
that there is an actual closure of the business. Thus, when the employer satisfactorily proved economic or business
losses with sufficient supporting evidence and have complied with the requirements mandated under the law to
justify retrenchment, as in this case, it cannot be said that the subsequent acts of the employer to rehire the
retrenched employees or to hire new employees constitute bad faith. It could have been different if from the
beginning the retrenchment was illegal and the employer subsequently hired new employees or rehired some of the
previously dismissed employees because that would have constituted bad faith. Consequently, when Lapanday
continued its operation, it was merely exercising its prerogative to streamline its operations, and to rehire or hire only
those who are qualified to replace the services rendered by the retrenched employees in order to effect more
economic and efficient methods of production and to forestall business losses. The rehiring or reemployment of
retrenched employees does not necessarily negate the presence or imminence of losses which prompted Lapanday
to retrench.

In spite of overwhelming support granted by the social justice provisions of our Constitution in favor of labor, the
fundan1ental law itself guarantees, even during the process of tilting the scales of social justice towards workers
and employees, "the right of enterprises to reasonable returns of investment and to expansion and growth." To hold
otherwise would not only be oppressive and inhuman, but also counter-productive and ultimately subversive of the
nation's thrust towards a resurgence in our economy which would ultimately benefit the majority of our people.
Labor II – 1
Where appropriate and where conditions are in accord with law and jurisprudence, the Court has authorized valid
reductions in the workforce to forestall business losses, the hemorrhaging of capital, or even to recognize an
obvious reduction in the volume of business which has rendered certain employees redundant. 135

Conselquently, we cannot pass judgment on the motive behind PAL's initiative to implement "Plan 22" instead of
"Plan 14." The prerogative thereon belonged to the management alone due to its being in the best position to
assess its own financial situation and operate its own business. Even the Court has no power to interfere with such
exercise of the prerogative.

PAL used fair and reasonable criteria in selecting the

employees to be retrenched pursuant to the CBA

The July 22, 2008 decision agreed with the holding by the CA that PAL was not obligated to consult with F ASAP on
the standards to be used in evaluating the performance of its employees. Nonetheless, PAL was found to be unfair
and unreasonable in selecting the employees to be retrenched by doing away with the concept of seniority, loyalty,
and past efficiency by solely relying on the employees' 1997 performance rating; and that the retrenchment of
employees due to "other reasons," without any details or specifications, was not allowed and had no basis in fact
and in law. 136

PAL contends that it used fair and reasonable criteria in accord with Sections 23, 30 and 112 of the 1995-2000
CBA;  that the NLRC’s use of the phrase "other reasons" referred to the varied grounds (i.e. excess sick leaves,
137

previous service of suspension orders, passenger complains, tardiness, etc.) employed in conjunction with seniority
in selecting the employees to be terminated;  that the CBA did not require reference to performance rating of the
138

previous years, but to the use of an efficiency rating for a single year;  and that it adopted both efficiency rating and
139

inverse seniority as criteria in the selection pursuant to Section 112 of the CBA. 140

PAL’s contentions are meritorious.

In selecting the employees to be dismissed, the employer is required to adopt fair and reasonable criteria, taking
into consideration factors like: (a) preferred status; (b) efficiency; and (c) seniority, among others.  The requirement
141

of fair and reasonable criteria is imposed on the employer to preclude the occurrence of arbitrary selection of
employees to be retrenched. Absent any showing of bad faith, the choice of who should be retrenched must be
conceded to the employer for as long as a basis for the retrenchment exists. 142

We have found arbitrariness in terminating the employee under the guise of a retrenchment program wherein the
employer discarded the criteria it adopted in terminating a particular employee;  when the termination discriminated
143

the employees on account of their union membership without regard to their years of service;  the timing of the
144

retrenchment was made a day before the employee may be regularized;  when the employer disregarded
145

altogether the factor of seniority and choosing to retain the newly hired employees;  that termination only followed
146

the previous retrenchment of two non-regular employees;  and when there is no appraisal or criteria applied in the
147

selection. 148

On the other hand, we have considered as valid the retrenchment of the employee based on work efficiency,  or 149

poor performance;  or the margins of contribution of the consultants to the income of the company;  or
150 151

absenteeism, or record of disciplinary action, or efficiency and work attitude;  or when the employer exerted efforts
152

to solicit the employees' participation in reviewing the criteria to be used in selecting the workers to be laid off. 153

In fine, the Court will only strike down the retrenchment of an employee as capricious, whimsical, arbitrary, and
prejudicial in the absence of a clear-cut and uniform guideline followed by the employer in selecting him or her from
the work pool. Following this standard, PAL validly implemented its retrenchment program.

PAL resorted to both efficiency rating and inverse seniority in selecting the employees to be subject of termination.
As the NLRC keenly pointed out, the "ICCD Masterank 1997 Ratings - Seniority Listing" submitted by PAL
sufficiently established the criteria for the selection of the employees to be laid off. To insist on seniority as the sole

Labor II – 1
basis for the selection would be unwarranted, it appearing that the applicable CBA did not establish such limitation.
This counters the statement in the dissent that the retrenchment program was based on unreasonable standards
without regard to service, seniority, 1oya1ty and performance. 154

In this connection, we adopt the following cogent observations by the CA on the matter for being fully in accord with
law and jurisprudence:

FASAP insists that several CBA provisions have been violated by the retrenchment. They are the provisions on
seniority, performance appraisal, reduction in personnel and downgrading and pem1anent OCARs. Seniority and
performance stand out because these were the main considerations of PAL in selecting workers to be retrenched.
Under the CBA, seniority is defined "to mean a measure of a regular Cabin Attendant’s claim in relation to other
regular Cabin Attendants holding similar positions, to preferential consideration whatever the Company exercises its
right to promote to a higher paying position of lay-off of any Cabin Attendant." Seniority, however, is not the sole
determinant of retention. This is clear under Article XIII on performance appraisal of the CBA provisions.

Under the CBA, several factors are likewise taken into consideration like performance and professionalism
in addition to the seniority factor. However, the criteria for performance and professionalism are not
indicated in the CBA but are to be formulated by PAL in consultation with FASAP. Where there is
retrenchment, cabin attendants who fail to attain at least 85% of the established criteria shall be demoted
progressively. Domestic cabin attendants, the occupants of lowest rung of the organizational hierarchy, are
to be retrenched once they fail to meet the required percentage.

We have painstakingly examined the records and We find no indication that these provisions have been
grossly disregarded as to taint the retrenchment with illegality. PAL relied on specific categories of criteria,
such as merit awards, physical appearance, attendance and checkrides, to guide its selection of employees
to be removed. We do not find anything legally objectionable in the adoption of the foregoing norms. On the
contrary, these norms are most relevant to the nature of a cabin attendant's work.

However, the contention of FASAP that these criteria required its prior conformity before adoption is not
supported by Section 30, Article VIII of the CBA. Note should be taken that this provision only mandates
PAL to "meet and consult" the Association (FASAP) in the formulation of the Performance and
Professionalism Appraisal System." By the ordinary import of this provision, PAL is only required to confer
with FASAP; it is not at all required to forge an addendum to the CBA, which will concretize the appraisal
system as basis for retrenchment or retention. 155

To require PAL to further limit its criteria would be inconsistent with jurisprudence and the principle of fairness.
Instead, we hold that for as long as PAL followed a rational criteria defined or set by the CBA and existing laws and
jurisprudence in determining who should be included in the retrenchment program., it sufficiently met the standards
of fain1ess and reason in its implementation of its retrenchment program.

The retrenched employees signed valid quitclaims

The July 22, 2008 decision struck down as illegal the quitclaims executed by the retrenched employees because of
the mistaken conclusion that the retrenchment had been unlawfully executed.

We reverse.

In EDI Staffbuilders International, Inc. v. National Labor Relations Commission,   we laid down the basic contents of
156

valid and effective quitclaims and waivers, to wit:

In order to prevent disputes on the validity and enforceability of quitclaims and waivers of employees under
Philippine laws, said agreements should contain the following:

1. A fixed amount as full and final compromise settlement;

Labor II – 1
2. The benefits of the employees if possible with the corresponding amounts, which the employees arc giving up
in consideration of the fixed compromise amount;

3. A statement that the employer has dearly explained to the employee in English, Filipino, or in the dialect
known to the employees - that by signing the waiver or quitclaim, they are forfeiting or relinquishing their right to
receive the benefits which are due them under the law; and

4. A statement that the employees signed and executed the document voluntarily, and had fully understood
the contents of the document and that their consent was freely given without any threat, violence, duress,
intimidation, or undue influence exerted on their person.  (Bold supplied for emphasis)
157

The release and quitclaim signed by the affected employees substantially satisfied the aforestated requirements.
The consideration was clearly indicated in the document in the English language, including the benefits that the
employees would be relinquishing in exchange for the amounts to be received. There is no question that the
employees who had occupied the position of flight crew knew and understood the English language. Hence, they
fully comprehended the terms used in the release and quitclaim that they signed.

Indeed, not all quitclaims are per se invalid or against public policy.  A quitclaim is invalid or contrary to public policy
1a\^/phi1

only: (1) where there is clear proof that the waiver was wrangled from an unsuspecting or gullible person; or (2)
where the terms of settlement are unconscionable on their face.  Based on these standards, we uphold the release
158

and quitclaims signed by the retrenched employees herein.

WHEREFORE, the Court:

(a) GRANTS the Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for
Reconsideration of the Decision of July 22, 2008 filed by the respondents Philippine Airlines, Inc. and Patria
Chiong;

(b) DENIES the Motion for Reconsideration (Re: The Honorable Court's Resolution dated March 13,
2012) filed by the petitioner Flight Attendants and Stewards Association of the Philippines;

(c) SETSASIDE the decision dated July 22, 2008 and resolution dated October 2, 2009; and

(d) AFFIRMS the decision of the Court of Appeals dated August 23, 2006.

Labor II – 1
 34.) G.R. No. 181738 : January 30, 2013

GENERAL MILLING CORPORATION, Petitioner, v. VIOLETA L. VIAJAR, Respondent.

DECISION

REYES, J.:

This is a Petition1 for Review on Certiorari under Rule 45 of the Rules of Court filed by petitioner
General Milling Corporation (GMC), asking the Court to set aside the Decision2 dated September 21,
2007 and the Resolution3 dated January 30, 2008 of the Court of Appeals (CA) in CA-G.R. SP No.
01734; and to reinstate the Decision4 dated October 28, 2005 and Resolution5 dated January 31,
2006 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-000416-05.

The antecedent facts are as follows: cralawlibrary

GMC is a domestic corporation with principal office in Makati City and a manufacturing plant in Lapu-
Lapu City.

In October 2003, GMC terminated the services of thirteen (13) employees for redundancy, including
herein respondent, Violeta Viajar (Viajar). GMC alleged that it has been gradually downsizing its
Vismin (Visayas-Mindanao) Operations in Cebu where a sizeable number of positions became
redundant over a period of time.6 ?r?l1

On December 2, 2003, Viajar filed a Complaint7 for Illegal Dismissal with damages against GMC, its
Human Resource Department (HRD) Manager, Johnny T. Almocera (Almocera), and Purchasing
Manager, Joel Paulino before the Regional Arbitration Branch (RAB) No. VII, NLRC, Cebu City.

In her Position Paper,8 Viajar alleged that she was employed by GMC on August 6, 1979 as Invoicing
Clerk. Through the years, the respondent held various positions in the company until she became
Purchasing Staff.

On October 30, 2003, Viajar received a Letter-Memorandum dated October 27, 2003 from GMC,
through Almocera, informing her that her services were no longer needed, effective November 30,
2003 because her position as Purchasing Staff at the Purchasing Group, Cebu Operations was
deemed redundant. Immediately thereafter, the respondent consulted her immediate superior at that
time, Thaddeus Oyas, who told her that he too was shocked upon learning about it.9 ?r?l1

When Viajar reported for work on October 31, 2003, almost a month before the effectivity
of her severance from the company, the guard on duty barred her from entering GMCs
premises. She was also denied access to her office computer and was restricted from punching her
daily time record in the bundy clock.10 ?r?l1

On November 7, 2003, Viajar was invited to the HRD Cebu Office where she was asked to sign
certain documents, which turned out to be an "Application for Retirement and Benefits." The
respondent refused to sign and sought clarification because she did not apply for retirement and
instead asserted that her services were terminated for alleged redundancy. Almocera told her that
her signature on the Application for Retirement and Benefits was needed to process her separation
pay. The respondent also claimed that between the period of July 4, 2003 and October 13, 2003,
GMC hired fifteen (15) new employees which aroused her suspicion that her dismissal was not
necessary.11 At the time of her termination, the respondent was receiving the salary rate
of P19,651.41 per month.12 ?r?l1

Labor II – 1
For its part, the petitioner insisted that Viajars dismissal was due to the redundancy of her position.
GMC reasoned out that it was forced to terminate the services of the respondent because of the
economic setbacks the company was suffering which affected the companys profitability, and the
continuing rise of its operating and interest expenditures. Redundancy was part of the petitioners
concrete and actual cost reduction measures. GMC also presented the required "Establishment
Termination Report" which it filed before the Department of Labor and Employment (DOLE) on
October 28, 2003, involving thirteen (13) of its employees, including Viajar. Subsequently, GMC
issued to the respondent two (2) checks respectively amounting to P440,253.02 and P21,211.35 as
her separation pay.13 ?r?l1

On April 18, 2005, the Labor Arbiter (LA) of the NLRC RAB No. VII, Cebu City, rendered a Decision,
the decretal portion of which reads: cralawlibrary

WHEREFORE, foregoing considered, judgment is hereby rendered declaring that respondents acted in
good faith in terminating the complainant from the service due to redundancy of works, thus,
complainants refusal to accept the payment of her allowed separation pay and other benefits under
the law is NOT JUSTIFIED both in fact and law, and so, therefore complainants case for illegal
dismissal against the herein respondents and so are complainants monetary claims are hereby
ordered DISMISSED for lack of merit.

SO ORDERED.14   ?r?l1 ???ñr?bl?š ??r†??l  l?? l?br?rÿ

The LA found that the respondent was properly notified on October 30, 2003 through a Letter-
Memorandum dated October 27, 2003, signed by GMCs HRD Manager Almocera, that her position as
Purchasing Staff had been declared redundant. It also found that the petitioner submitted to the
DOLE on October 28, 2003 the "Establishment Termination Report." The LA even faulted the
respondent for not questioning the companys action before the DOLE Regional Office, Region VII,
Cebu City so as to compel the petitioner to prove that Viajars position was indeed redundant. It ruled
that the petitioner complied with the requirements under Article 283 of the Labor Code, considering
that the nation was then experiencing an economic downturn and that GMC must adopt measures for
its survival.15?r?l1

Viajar appealed the aforesaid decision to the NLRC. On October 28, 2005, the NLRC promulgated its
decision, the dispositive portion of which reads: cralawlibrary

WHEREFORE, premises considered, the Decision of the Labor Arbiter declaring the validity of
complainants termination due to redundancy is hereby AFFIRMED. Respondent General Milling
Corporation is hereby ordered to pay complainants separation pay in the amount of P461,464.37.

SO ORDERED.16   ?r?l1 ???ñr?bl?š ??r†??l  l?? l?br?rÿ

The NLRC, however, stated that it did not agree with the LA that Viajar should be faulted for failing to
question the petitioners declaration of redundancy before the DOLE Regional Office, Region VII, Cebu
City. It was not imperative for Viajar to challenge the validity of her termination due to
redundancy.17 Notwithstanding, the NLRC affirmed the findings of the LA that Viajars dismissal was
legal considering that GMC complied with the requirements provided for under Article 283 of the
Labor Code and existing jurisprudence, particularly citing Asian Alcohol Corporation v. NLRC.18 The
NLRC further stated that Viajar was aware of GMCs "reduction mode," as shown in the GMC Vismin
Manpower Complement, as follows: cralawlibrary

No. of Employees
Year Manpower Profile
Terminated (Redundancy)

Labor II – 1
 2000 795
2001 782
2002 736 41
2003 721 24
2004 697 16
2005 696 (As of June 2005) 0619

The NLRC stated that the characterization of positions as redundant is an exercise of the employers
business judgment and prerogative. It also ruled that the petitioner did not exercise this prerogative
in bad faith and that the payment of separation pay in the amount of P461,464.37 was in compliance
with Article 283 of the Labor Code.20 ?r?l1

Respondent Viajar filed a Motion for Reconsideration which was denied by the NLRC in its Resolution
dated January 31, 2006.

Undaunted, Viajar filed a petition for certiorari before the CA. In the now assailed Decision dated
September 21, 2007, the CA granted the petition, reversing the decision of the NLRC in the following
manner: cralawlibrary

WHEREFORE, premises considered, this Petition for Certiorari is GRANTED. The Decision, dated 28
October 2005, and Resolution, dated 31 January 2006 respectively, of public respondent National
Labor Relations Commission-Fourth Division, Cebu City, in NLRC Case No. V-000416-05 (RAB VII-12-
2495-03) are SET ASIDE. A new judgment is entered DECLARING the dismissal ILLEGAL and ordering
respondent to reinstate petitioner without loss of seniority rights and other privileges with full
backwages inclusive of allowances and other benefits computed from the time she was dismissed on
30 November 2003 up to the date of actual reinstatement. Further, moral and exemplary damages,
in the amount of Fifty Thousand Pesos ([P]50,000.00) each; and attorneys fees equivalent to ten
percent (10%) of the total monetary award, are awarded.

Costs against respondent.

SO ORDERED.21 ?r?l1

Aggrieved by the reversal of the NLRC decision, GMC filed a motion for reconsideration. However, in
its Resolution dated January 30, 2008, the CA denied the same; hence, this petition.

The petitioner raises the following issues, to wit: cralawlibrary

I. THE DECISION OF SEPTEMBER 21, 2007 AND THE RESOLUTION OF JANUARY 30, 2008 OF THE
COURT OF APPEALS ARE CONTRARY TO LAW AND ESTABLISHED JURISPRUDENCE.

II. THE DECISION OF SEPTEMBER 21, 2007 AND THE RESOLUTION OF JANUARY 30, 2008 OF THE
COURT OF APPEALS VIOLATE THE LAW AND ESTABLISHED JURISPRUDENCE ON THE OBSERVANCE
OF RESPECT AND FINALITY TO FACTUAL FINDINGS OF THE NATIONAL LABOR RELATIONS
COMMISSION.

III. THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ITS DECISION OF
SEPTEMBER 21, 2007 AND RESOLUTION OF JANUARY 30, 2008 AS THE SAME ARE CONTRARY TO
THE EVIDENCE ON RECORD.22   ?r?l1 ???ñr?bl?š  ??r†??l  l?? l?br?rÿ

Labor II – 1
The petition is denied.

The petitioner argues that the factual findings of the NLRC, affirming that of the LA must be accorded
respect and finality as it is supported by evidence on record. Both the LA and the NLRC found the
petitioners evidence sufficient to terminate the employment of respondent on the ground of
redundancy. The evidence also shows that GMC has complied with the procedural and substantive
requirements for a valid termination. There was, therefore, no reason for the CA to disturb the
factual findings of the NLRC.23?r?l1

The rule is that factual findings of quasi-judicial agencies such as the NLRC are generally accorded
not only respect, but at times, even finality because of the special knowledge and expertise gained
by these agencies from handling matters falling under their specialized jurisdiction.24 It is also settled
that this Court is not a trier of facts and does not normally embark in the evaluation of evidence
adduced during trial.25 This rule, however, allows for exceptions. One of these exceptions covers
instances when the findings of fact of the trial court, or of the quasi-judicial agencies concerned, are
conflicting or contradictory with those of the CA. When there is a variance in the factual findings, it is
incumbent upon the Court to re-examine the facts once again.26 ?r?l1

Furthermore, another exception to the general rule is when the said findings are not supported by
substantial evidence or if on the basis of the available facts, the inference or conclusion arrived at is
manifestly erroneous.27 Factual findings of administrative agencies are not infallible and will be set
aside when they fail the test of arbitrariness.28 In the instant case, the Court agrees with the CA that
the conclusions arrived at by the LA and the NLRC are manifestly erroneous.

GMC claims that Viajar was validly dismissed on the ground of redundancy which is one of the
authorized causes for termination of employment. The petitioner asserts that it has observed the
procedure provided by law and that the same was done in good faith. To justify the respondents
dismissal, the petitioner presented: (i) the notification Letter-Memorandum dated October 27, 2003
addressed to the respondent which was received on October 30, 2003;29 (ii) the "Establishment
Termination Report" as prescribed by the DOLE;30 (iii) the two (2) checks issued in the respondents
name amounting to P440,253.02 and P21,211.35 as separation pay;31 and (iv) the list of dismissed
employees as of June 6, 2006 to show that GMC was in a "reduction mode."32 Both the LA and the
NLRC found these sufficient to prove that the dismissal on the ground of redundancy was done in
good faith.

The Court does not agree.

Article 283 of the Labor Code provides that redundancy is one of the authorized causes for dismissal.
It reads:cralawlibrary

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

Labor II – 1
From the above provision, it is imperative that the employer must comply with the requirements for
a valid implementation of the companys redundancy program, to wit: (a) the employer must serve a
written notice to the affected employees and the DOLE at least one (1) month before the intended
date of retrenchment; (b) the employer must pay the employees a separation pay equivalent to at
least one month pay or at least one month pay for every year of service, whichever is higher; (c) the
employer must abolish the redundant positions in good faith; and (d) the employer must set fair and
reasonable criteria in ascertaining which positions are redundant and may be abolished.33 ?r?l1

In Smart Communications, Inc., v. Astorga,34 the Court held that: cralawlibrary

The nature of redundancy as an authorized cause for dismissal is explained in the leading case of
Wiltshire File Co., Inc. v. National Labor Relations Commission, viz: cralawlibrary

"x x x redundancy in an employers personnel force necessarily or even ordinarily refers to duplication
of work. That no other person was holding the same position that private respondent held prior to
termination of his services does not show that his position had not become redundant. Indeed, in any
well organized business enterprise, it would be surprising to find duplication of work and two (2) or
more people doing the work of one person. We believe that redundancy, for purposes of the Labor
Code, exists where the services of an employee are in excess of what is reasonably demanded by the
actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous,
and superfluity of a position or positions may be the outcome of a number of factors, such as
overhiring of workers, decreased volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the enterprise." ???ñr?bl?š  ??r†??l  l?? l?br?rÿ

The characterization of an employees services as superfluous or no longer necessary and, therefore,

properly terminable, is an exercise of business judgment on the part of the employer. The wisdom
and soundness of such characterization or decision is not subject to discretionary review provided, of
course, that a violation of law or arbitrary or malicious action is not shown.35 (Emphasis supplied and
citations omitted)

While it is true that the "characterization of an employees services as superfluous or no longer

necessary and, therefore, properly terminable, is an exercise of business judgment on the part of the
employer,"36 the exercise of such judgment, however, must not be in violation of the law, and must
not be arbitrary or malicious. The Court has always stressed that a company cannot simply declare
redundancy without basis. To exhibit its good faith and that there was a fair and reasonable criteria
in ascertaining redundant positions, a company claiming to be over manned must produce adequate
proof of the same.

We reiterate what was held in Caltex (Phils.), Inc. v. NLRC:37 ?r?l1

In Asufrin, Jr. v. San Miguel Corporation, we ruled that it is not enough for a company to merely
declare that it has become overmanned (sic). It must produce adequate proof of such redundancy to
justify the dismissal of the affected employees.

In Panlilio v. National Labor Relations Commission, we held that evidence must be presented to
substantiate redundancy such as but not limited to the new staffing pattern, feasibility
studies/proposal, on the viability of the newly created positions, job description and the approval by
the management of the restructuring.38 (Emphasis supplied and citations omitted)

In the instant case, the Court agrees with the CA when it held that the petitioner failed to present
substantial proof to support GMCs general allegations of redundancy. As shown from the records, the
petitioner simply presented as its evidence of good faith and compliance with the law the notification
letter to respondent Viajar;39 the "Establishment Termination Report" it submitted to the DOLE
Office;40 the two (2) checks issued in the respondents name amounting to P440,253.02
Labor II – 1
and P21,211.35;41 and the list of terminated employees as of June 6, 2006.42 We agree with the CA
that these are not enough proof for the valid termination of Viajars employment on the ground of
redundancy.

The letter-memorandum which contains general allegations is not enough to convince this Court that
Viajars termination of employment due to redundancy was warranted under the circumstances. There
is no showing that GMC made an evaluation of the existing positions and their effect to the company.
Neither did GMC exert efforts to present tangible proof that it was experiencing business slow down
or over hiring. The "Establishment Termination Report" it submitted to the DOLE Office did not
account for anything to justify declaring the positions redundant. The Court notes that the list of
terminated employees presented by GMC was a list taken as of June 6, 2006 or almost three years
after the respondent was illegally dismissed and almost a year after the LA promulgated its decision.
While the petitioner had been harping that it was on a "reduction mode" of its employees, it has not
presented any evidence (such as new staffing pattern, feasibility studies or proposal, viability of
newly created positions, job description and the approval of the management of the
restructuring,43 audited financial documents like balance sheets, annual income tax returns and
others)44 which could readily show that the companys declaration of redundant positions was
justified. Such proofs, if presented, would suffice to show the good faith on the part of the employer
or that this business prerogative was not whimsically exercised in terminating respondents
employment on the ground of redundancy. Unfortunately, these are wanting in the instant case. The
petitioner only advanced a self-serving general claim that it was experiencing business reverses and
that there was a need to reduce its manpower complement.

On the other hand, the respondent presented proof that the petitioner had been hiring new
employees while it was firing the old ones,45 negating the claim of redundancy. It must, however, be
pointed out that in termination cases, like the one before us, the burden of proving that the dismissal
of the employees was for a valid and authorized cause rests on the employer. It was incumbent upon
the petitioner to show by substantial evidence that the termination of the employment of the
respondent was validly made and failure to discharge that duty would mean that the dismissal is not
justified and therefore illegal.46
?r?l1

Furthermore, the Court cannot overlook the fact that Viajar was prohibited from entering the
company premises even before the effectivity date of termination; and was compelled to sign an
"Application for Retirement and Benefits." These acts exhibit the petitioners bad faith since it cannot
be denied that the respondent was still entitled to report for work until November 30, 2003. The
demand for her to sign the "Application for Retirement and Benefits" also contravenes the fact that
she was terminated due to redundancy. Indeed, there is a difference between voluntary retirement of
an employee and forced termination due to authorized causes.

In Quevedo v. Benguet Electric Cooperative, Incorporated,47 this Court explained the difference

between retirement and termination due to redundancy, to wit: cralawlibrary

While termination of employment and retirement from service are common modes of ending
employment, they are mutually exclusive, with varying juridical bases and resulting benefits.
Retirement from service is contractual (i.e. based on the bilateral agreement of the employer and
employee), while termination of employment is statutory (i.e. governed by the Labor Code and other
related laws as to its grounds, benefits and procedure). The benefits resulting from termination vary,
depending on the cause. For retirement, Article 287 of the Labor Code gives leeway to the parties to
stipulate above a floor of benefits.

xxx

The line between voluntary and involuntary retirement is thin but it is one which this Court has
drawn. Voluntary retirement cuts employment ties leaving no residual employer liability; involuntary

Labor II – 1
retirement amounts to a discharge, rendering the employer liable for termination without cause. The
employees intent is the focal point of analysis. In determining such intent, the fairness of the process
governing the retirement decision, the payment of stipulated benefits, and the absence of badges of
intimidation or coercion are relevant parameters.48 (Emphasis supplied and citations omitted)

Clearly, the instant case is not about retirement since the term has its peculiar meaning and is
governed by Article 287 of the Labor Code. Rather, this is a case of termination due to redundancy
under Article 283 of the Labor Code. Thus, the demand of GMC for the respondent to sign an
"Application for Retirement and Benefits" is really suspect.

Finally, the Court agrees with the CA that the award of moral and exemplary damages is proper. The
Court has awarded moral damages in termination cases when bad faith, malice or fraud attend the
employees dismissal or where the act oppresses labor, or where it was done in a manner contrary to
morals, good customs or public policy.49 We quote with favor the findings of the CA: cralawlibrary

We also award moral and exemplary damages to petitioner. While it is true that good faith is
presumed, the circumstances surrounding the dismissal of petitioner negate its existence. Moral
damages may be recovered only where the dismissal of the employee was tainted by bad faith or
fraud, or where it constituted an act oppressive to labor, and done in a manner contrary to morals,
good customs or public policy while exemplary damages are recoverable only if the dismissal was
done in a wanton, oppressive, or malevolent manner. To reiterate, immediately after receipt of her
termination letter which was effective on 30 November 2003, petitioner was no longer treated as an
employee of respondent as early as the 31st of October 2003; she was already barred from entering
the company premises; she was deprived access to her office computer; and she was excluded from
the bandy [sic] clock. She was also made to sign documents, including an "APPLICATION FOR
RETIREMENT AND BENEFITS" in the guise of payment of her separation pay. When petitioner
confronted her immediate superior regarding her termination, the latters shock aggravated her
confusion and suffering. She also learned about the employment of a number of new employees,
several of whom were even employed in her former department. Petitioner likewise suffered mental
torture brought about by her termination even though its cause was not clear and
substantiated.50 (Citations omitted)

WHEREFORE, the petition is DENIED. The Decision dated September 21, 2007 of the Court of
Appeals, as well as its Resolution dated January 30, 2008 in CA-G.R. SP No. 01734, are hereby
AFFIRMED.

Labor II – 1
 35.) G.R. No. 188753, October 01, 2014

AM-PHIL FOOD CONCEPTS, INC., Petitioner, v. PAOLO JESUS T. PADILLA, Respondent.

DECISION

LEONEN,  J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, praying that the
February 25, 2009 decision2 of the Court of Appeals sustaining the February 28, 2007 resolution3 of
the National Labor Relations Commission, and the July 3, 2009 resolution4 of the Court of Appeals
denying petitioner Am-Phil Food Concept, Inc.’s (Am-Phil) motion for reconsideration, be annulled. 
The February 28, 2007 decision of the National Labor Relations Commission affirmed the May 9, 2005
decision5 of Labor Arbiter Eric V. Chuanico that held that respondent Paolo Jesus T. Padilla (Padilla)
was illegally dismissed.

Padilla’s position paper6 states that he was hired on April 1, 2002 as a Marketing Associate by Am-
Phil, a corporation engaged in the restaurant business.7  On September 29, 2002, Am-Phil sent
Padilla a letter confirming his regular employment.8  Sometime in the first week of March 2004, three
(3) of Am-Phil’s officers (Marketing Supervisor Elaine de Jesus, Area Director Art Latinazo, and
Human Resources Officer Eunice Tugab) informed Padilla that Am-Phil would be implementing a
retrenchment program that would be affecting three (3) of its employees, Padilla being one of them. 
The retrenchment program was allegedly on account of serious and adverse business conditions, i.e.,
lack of demand in the market, stiffer competition, devaluation of the Philippine peso, and escalating
operation costs.9cralawlawlibrary

Padilla questioned Am-Phil’s choice to retrench him. He noted that Am-Phil had six (6) contractual
employees, while he was a regular employee who had a good evaluation record.  He pointed out that
Am-Phil was actually then still hiring new employees.  He also noted that Am-Phil's sales have not
been lower relative to the previous year.10 cralawlawlibrary

In response, Am-Phil's three (3) officers gave him two options: (1) be retrenched with severance pay
or (2) be transferred as a waiter in Am-Phil’s restaurant, a move that entailed his demotion.11 cralawlawlibrary

On March 17, 2004, Am-Phil sent Padilla a memorandum notifying him of his retrenchment.12  Padilla
was paid separation pay in the amount of ?26,245.38.  On April 20, 2004, Padilla executed a
quitclaim and release in favor of Am-Phil.13 cralawlawlibrary

On July 28, 2004, Padilla filed the complaint14 for illegal dismissal (with claims for backwages,
damages, and attorney’s fees), which is now subject of this petition.  Apart from Am-Phil, Padilla
impleaded Am-Phil’s officers: Luis L. Vera, Jr., Winston L. Chan, Robert B. Epes, Richmond S. Yang,
John Arthur Latinazo, and Eunice D. Tugab.

For its defense, Am-Phil claimed that Padilla was not illegally terminated and that it validly exercised
a management prerogative.  It asserted that Padilla was hired merely as part of an experimental
marketing program.  It added that in 2003, it did suffer serious and adverse business losses and
that, in the first quarter of 2004, it was compelled to retrench employees so as to avoid further
losses.  Am-Phil also underscored that Padilla executed a quitclaim and release in its favor.  With
respect to its impleaded officers, Am-Phil claimed that the complaint should be dismissed as they
have a personality distinct and separate from Am-Phil.15 cralawlawlibrary

On May 9, 2005, Labor Arbiter Eric V. Chuanico (Labor Arbiter Chuanico) rendered the decision
finding that Padilla was illegally dismissed.16  He noted that Am-Phil failed to substantiate its claim of

Labor II – 1
serious business losses and that it failed to comply with the procedural requirement for a proper
retrenchment (i.e., notifying the Department of Labor and Employment).17  He also held that the
quitclaim and release executed by Padilla is contrary to law.18  Finding, however, that Padilla failed to
show bad faith on the part of Am-Phil’s officers, Labor Arbiter Chuanico dismissed the complaint with
respect to the latter and held that only Am-Phil was liable to Padilla.19 cralawlawlibrary

The dispositive portion of Labor Arbiter Chuanico’s decision reads: chanRoblesvirtualLawlibrary

Prescinding from the forgoing, this office orders the respondent to pay the complainant limited
backwages from the time of his dismissal up to the time of rendition of this judgment. The
computation of backwages as prepared by the NLRC Computation Unit is herewith attached and
made an integral part of this decision. Given that the position had already been abolished and since
separation pay had already been received by the complainant, reinstatement is no longer viable [sic]
remedy under the present situation.

As the complainant was constrained to hire the services of a lawyer, attorneys [sic] fees are ordered
paid equivalent to ten percent of the total award thereof [sic]. Complainants [sic] claim for damages
are [sic] denied for lack of merit.

For failure of the complainant to properly substantiate that individual respondents are guilty of bad
faith or conduct towards him (in Sunio et. al. vs. NLRC GRN L 57767 [sic] January 31, 1984) only
respondent Am-Phil Food Concepts, Inc. is held solidarily liable towards [sic] the complainant.

SO ORDERED.20 chanrobleslaw

On August 15, 2005, Am-Phil filed an appeal21 with the National Labor Relations Commission.  Apart
from asserting its position that Padilla was validly retrenched, Am-Phil claimed that Labor Arbiter
Chuanico was in error in deciding the case despite the pendency of its motion for leave to file
supplemental rejoinder.22  Through this supplemental rejoinder, Am-Phil supposedly intended to
submit its audited financial statements for the years 2001 to 2004 and, thereby, prove that it had
suffered business losses.  Am-Phil claimed that its right to due process was violated by Labor Arbiter
Chuanico’s refusal to consider its 2001 to 2004 audited financial statements.23 cralawlawlibrary

On February 28, 2007, the National Labor Relations Commission issued the resolution affirming Labor
Arbiter Chuanico’s ruling, albeit clarifying that Labor Arbiter Chuanico wrongly used the word
“solidarily” in describing Am-Phil’s liability to Padilla.24 cralawlawlibrary

With respect to Am-Phil’s claim that Labor Arbiter Chuanico erroneously ignored its 2001 to 2004
audited financial statements, the National Labor Relations Commission noted that a supplemental
rejoinder was not a necessary pleading in proceedings before labor arbiters.  It added that, with the
exception of the 2004 audited financial statements, all of Am-Phil’s relevant audited financial
statements were already available at the time it submitted its position paper, reply, and rejoinder,
but that Am-Phil failed to annex them to these pleadings.  The National Labor Relations Commission
added that, granting that this failure was due to mere oversight, Am-Phil was well in a position to
attach them in its memorandum of appeal but still failed to do so.25  Holding that Labor Arbiter
Chuanico could not be faulted for violating Am-Phil’s right to due process, the National Labor
Relations Commission emphasized that: chanRoblesvirtualLawlibrary

[O]mission by a party to rebut that which would have naturally invited an immediate pervasive and
stiff competition creates an adverse inference that either the controverting evidence to be presented
will only prejudice its case or that the uncontroverted evidence speaks the truth.26 (Citation omitted)

The dispositive portion of this National Labor Relations Commission resolution reads: chanRoblesvirtualLawlibrary

Labor II – 1
WHEREFORE, the foregoing premises considered, the instant appeal is DIMISSED for lack of merit.
Accordingly, the decision appealed from is AFFIRMED.

However, the word “solidarily” in the last sentence of the decision should be deleted to conform with
the Labor Arbiter’s finding that the complainant-appellee failed to properly substantiate that
individual respondents-appellants were guilty of bad faith or conduct towards him.

SO ORDERED.27 chanrobleslaw

In the resolution28 dated April 27, 2007, the National Labor Relations Commission denied Am-Phil’s
motion for reconsideration.

Am-Phil then filed with the Court of Appeals a petition for certiorari29 under Rule 65 of the 1997 Rules
of Civil Procedure.

On February 25, 2009, the Court of Appeals rendered the assailed decision30 dismissing Am-Phil’s
petition for certiorari and affirming the National Labor Relations Commission’s February 28, 2007 and
April 27, 2007 resolutions.  The Court of Appeals denied Am-Phil's motion for reconsideration in its
July 3, 2009 resolution.

Hence, this petition.

Am-Phil insists on its position that it was denied due process and posits that the National Labor
Relations Commission’s contrary findings are founded on “illogical ratiocinations.”31  It asserts that
the evidence support the conclusion that Padilla was validly dismissed, that it was an error to ignore
the quitclaim and release which Padilla had executed, and that Padilla’s retrenchment was a valid
exercise of management prerogative.32 cralawlawlibrary

For resolution is the issue of whether respondent Paolo Jesus T. Padila was dismissed through a valid
retrenchment implemented by petitioner Am-Phil Food Concepts, Inc.  Related to this, we must
likewise resolve the underlying issue of whether it was proper for Labor Arbiter Eric V. Chuanico to
have ruled that Padilla was illegally dismissed despite Am-Phil’s pending motion for leave to file
supplemental rejoinder.

Am-Phil’s right to due

process was not violated

Am-Phil faults Labor Arbiter Chuanico for not having allowed its motion for leave to file supplemental
rejoinder that included its 2001 to 2004 audited financial statements as annexes.  These statements
supposedly show that Am-Phil suffered serious business losses. Thus, it claims that its right to due
process was violated.

Am-Phil’s motion for leave to file supplemental rejoinder,33 dated May 20, 2005,34 was filed on May
31, 2005,35 well after Labor Arbiter Chuanico promulgated his May 9, 2005 decision.  Common sense
dictates that as the motion for leave to file supplemental rejoinder was filed after the rendition of the
decision, the decision could not have possibly taken into consideration the motion.  Giving
consideration to a motion filed after the promulgation of the decision is not only unreasonable, it is
impossible. It follows that it is completely absurd to fault Labor Arbiter Chuanico for not considering a
May 31 motion in his May 9 decision

Even if we were to ignore the curious fact that the motion was filed after the rendition of the
decision, Labor Arbiter Chuanico was under no obligation to admit the supplemental rejoinder.

Labor II – 1
Rule V of the 2002 National Labor Relations Commission Rules of Procedure (2002 Rules), which
were in effect when Labor Arbiter Chuanico promulgated his decision on May 9, 2005,36 provides: chanRoblesvirtualLawlibrary

SECTION 4. SUBMISSION OF POSITION PAPERS / MEMORANDA. Without prejudice to the provisions

of the last paragraph, SECTION 2 of this Rule, the Labor Arbiter shall direct both parties to submit
simultaneously their position papers with supporting documents and affidavits within an inextendible
period of ten (10) days from notice of termination of the mandatory conference.

These verified position papers to be submitted shall cover only those claims and causes of action
raised in the complaint excluding those that may have been amicably settled, and shall be
accompanied by all supporting documents including the affidavits of their respective witnesses
which shall take the place of the latter’s direct testimony. The parties shall thereafter not be
allowed to allege facts, or present evidence to prove facts, not referred to and any cause
or causes of action not included in the complaint or position papers, affidavits and other
documents.37 (Emphasis supplied)

....

SECTION 11. ISSUANCE OF AN ORDER SUBMITTING THE CASE FOR DECISION. After the parties
have submitted their position papers and supporting documents, and upon evaluation of the case the
Labor Arbiter finds no necessity of further hearing, he shall issue an order expressly declaring the
submission of the case for decision.38chanrobleslaw

From the provisions of the 2002 Rules, it is clear that a supplemental rejoinder, as correctly ruled by
the National Labor Relations Commission,39 is not a pleading which a labor arbiter is duty-bound to
accept.40  Even following changes to the National Labor Relations Commission Rules of Procedure in
2005 and 2011, a rejoinder has not been recognized as a pleading that labor arbiters must
necessarily admit.  The 2005 and 2011 National Labor Relations Commission Rules of Procedure only
go so far as to recognize that a reply “may” be filed by the parties.41cralawlawlibrary

Thus, Labor Arbiter Chuanico was under no obligation to grant Am-Phil’s motion for leave to admit
supplemental rejoinder and, thereby, consider the supplemental rejoinder’s averments and annexes. 
That Am-Phil had to file a motion seeking permission to file its supplemental rejoinder (i.e., motion
for leave to file) is proof of its own recognition that the labor arbiter is under no compulsion to accept
any such pleading and that the supplemental rejoinder’s admission rests on the labor arbiter’s
discretion.

The standard of due process in labor cases was explained by this court in Sy v. ALC Industries,
Inc.:42cralawlawlibrary

Due process is satisfied when the parties are afforded fair and reasonable opportunity to explain their
respective sides of the controversy. In Mariveles Shipyard Corp. v. CA, we held: chanRoblesvirtualLawlibrary

The requirements of due process in labor cases before a Labor Arbiter is satisfied when the
parties are given the opportunity to submit their position papers to which they are supposed
to attach all the supporting documents or documentary evidence that would prove their respective
claims, in the event that the Labor Arbiter determines that no formal hearing would be conducted or
that such hearing was not necessary.43 (Emphasis in the original)

Am-Phil filed three (3) pleadings with Labor Arbiter Chuanico: first, its position paper44 on September
9, 2004; second, its reply45 on September 30, 2004; and third, its rejoinder46 on October 11, 2004. 
It was more than six (6) months after it had filed its rejoinder that it filed its motion for leave to
admit supplemental rejoinder on May 31, 2005.

Labor II – 1
Its three (3) pleadings having been allowed, Am-Phil had no shortage of opportunities to plead its
claims and to adduce its evidence.  It has no basis for claiming that it was not “afforded [a] fair and
reasonable opportunity to explain [its side] of the controversy.”47  The filing of its motion for leave to
admit supplemental rejoinder represents nothing more than a belated and procedurally inutile
attempt at resuscitating its case.

Retrenchment and its

requirements

Article 283 of the Labor Code recognizes retrenchment as an authorized cause for terminating
employment.  It states: chanRoblesvirtualLawlibrary

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

In Sebuguero v. National Labor Relations Commission,48 this court explained the concept of

retrenchment as follows: chanRoblesvirtualLawlibrary

Retrenchment . . . is used interchangeably with the term "lay-off." It is the termination of

employment initiated by the employer through no fault of the employee's 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. Simply put, it is an act of the employer of dismissing employees
because of losses in the operation of a business, lack of work, and considerable reduction on the
volume of his business, a right consistently recognized and affirmed by this Court.49 chanrobleslaw

As correctly pointed out by Am-Phil, retrenchment entails an exercise of management prerogative. 

In Andrada v. National Labor Relations Commission,50 this court stated: chanRoblesvirtualLawlibrary

Retrenchment is an exercise of management’s prerogative to terminate the employment of its

employees en masse, to either minimize or prevent losses, or when the company is about to close or
cease operations for causes not due to business losses.51 chanrobleslaw

Nevertheless, as has also been emphasized in Andrada, the exercise of management prerogative is
not absolute: chanRoblesvirtualLawlibrary

A company’s exercise of its management prerogatives is not absolute. It cannot exercise its
prerogative in a cruel, repressive, or despotic manner. We held in  F.F. Marine Corp. v. NLRC: chanRoblesvirtualLawlibrary

Labor II – 1
This 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 irregular termination of
employment. Imagined or undocumented business losses present the least propitious scenario to
justify retrenchment.52 (Underscoring supplied, citation omitted)

Thus, retrenchment has been described as “a measure of last resort when other less drastic means
have been tried and found to be inadequate.”53 cralawlawlibrary

Retrenchment is, therefore, not a tool to be wielded and used nonchalantly.  To justify retrenchment,
it “must be due to business losses or reverses which are serious, actual and real.”54 cralawlawlibrary

There are substantive requirements relating to the losses or reverses that must underlie a
retrenchment.  That these losses are serious relates to their gravity and that they are actual and real
relates to their veracity and verifiability.  Likewise, that a retrenchment is anchored on serious,
actual, and real losses or reverses is to say that the retrenchment is done in good faith and not
merely as a veneer to disguise the illicit termination of employees.  Equally significant is an
employer’s basis for determining who among its employees shall be retrenched.  Apart from these
substantive requirements are the procedural requirements imposed by Article 283 of the Labor Code.

Thus, this court has outlined the requirements for a valid retrenchment, each of which must be
shown by clear and convincing evidence, as follows: chanRoblesvirtualLawlibrary

(1) that the retrenchment is reasonably necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the employer;
(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 month pay or at least ½
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 (i.e., whether they are temporary, casual, regular or
managerial employees), efficiency, seniority, physical fitness, age, and financial hardship for certain
workers.55 (Citations omitted)

Am-Phil failed to establish

compliance with the requisites
for a valid retrenchment 

Am-Phil’s 2001 to 2004 audited financial statements, the sole proof upon which Am-Phil relies on to
establish its claim that it suffered business losses, have been deemed unworthy of consideration. 
These audited financial statements were mere annexes to the motion for leave to admit supplemental
rejoinder which Labor Arbiter Chuanico validly disregarded.  No credible explanation was offered as
to why these statements were not presented when the evidence-in-chief was being considered by the
labor arbiter.  It follows that there is no clear and convincing evidence to sustain the substantive
Labor II – 1
ground on which the supposed validity of Padilla’s retrenchment rests.

Moreover, it is admitted that Am-Phil did not serve a written notice to the Department of Labor and
Employment one (1) month before the intended date of Padilla’s retrenchment, as required by Article
283 of the Labor Code.56cralawlawlibrary

While it is true that Am-Phil gave Padilla separation pay, compliance with none but one (1) of the
many requisites for a valid retrenchment does not absolve Am-Phil of liability.

Padilla’s quitclaim and release

does not negate his having been
illegally dismissed 

It is of no consequence that Padilla ostensibly executed a quitclaim and release in favor of Am-Phil. 
This court’s pronouncements in F.F. Marine Corporation v. National Labor Relations
Commission,57 which similarly involved an invalid retrenchment, are of note: chanRoblesvirtualLawlibrary

Considering that the ground for retrenchment availed of by petitioners was not sufficiently and
convincingly established, the retrenchment is hereby declared illegal and of no effect. The quitclaims
executed by retrenched employees in favor of petitioners were therefore not voluntarily entered into
by them. Their consent was similarly vitiated by mistake or fraud. 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.58 (Citations omitted)

In sum, the Court of Appeals committed no error in holding that there was no grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the National Labor Relations
Commission in affirming the May 9, 2005 decision of Labor Arbiter Eric V. Chuanico holding that
respondent Paolo Jesus T. Padilla was illegally dismissed.

WHEREFORE, the petition for review on certiorari is DENIED.  The February 25, 2009 decision and
the July 3, 2009 resolution of the Court of Appeals are AFFIRMED.

Labor II – 1
36.) G.R. No. 191154               April 7, 2014

SPI TECHNOLOGIES, INC. and LEA VILLANUEVA, Petitioners,

vs.
VICTORIA K. MAPUA, Respondent.

DECISION

REYES, J.:

The Court remains steadfast on its stand that the determination of the continuing necessity of a particular officer or
position in a business corporation is a management prerogative, and the courts will not interfere unless arbitrary or
malicious action on the part of management is shown. Indeed, an employer has no legal obligation to keep more
employees than are necessary for the operation of its business.  In the instant case however, we find our intrusion
1

indispensable, to look into matters which we would otherwise consider as an exercise of management prerogative.
"Management prerogative" are not magic words uttered by an employer to bring him to a realm where our labor laws
cannot reach.

This is a petition for review on certiorari  under Rule 45 of the Rules of Court of the Decision  dated October 28,
2 3

2009 and Resolution  dated January 18, 2010 of the Court of Appeals (CA) in CA-G.R. SP. No. 107879.
4

The Facts

Victoria K. Mapua (Mapua) alleged that she was hired in 2003 by SPI Technologies, Inc. (SPI) and was the
Corporate Development’s Research/Business Intelligence Unit Head and Manager of the company. Subsequently in
August 2006, the then Vice President and Corporate Development Head, Peter Maquera (Maquera) hired Elizabeth
Nolan (Nolan) as Mapua’s supervisor. 5

Sometime in October 2006, the hard disk on Mapua’s laptop crashed, causing her to lose files and data. Mapua
informed Nolan and her colleagues that she was working on recovering the lost data and asked for their patience for
any possible delay on her part in meeting deadlines. 6

On November 13, 2006, Mapua retrieved the lost data with the assistance of National Bureau of Investigation Anti-
Fraud and Computer Crimes Division. Yet, Nolan informed Mapua that she was realigning Mapua’s position to
become a subordinate of co-manager Sameer Raina (Raina) due to her missing a work deadline. Nolan also
disclosed that Mapua’s colleagues were "demotivated" [sic] because she was "taking things easy while they were
working very hard," and that she was "frequently absent, under timing, and coming in late every time [Maquera]
goes on leave or on vacation." 7

On November 16, 2006, Mapua obtained a summary of her attendance for the last six months to prove that she did
not have frequent absences or under time when Maquera would be on leave or vacation. When shown to Nolan,
she was merely told not to give the matter any more importance and to just move on. 8

In December 2006, Mapua noticed that her colleagues began to ostracize and avoid her. Nolan and Raina started
giving out majority of her research work and other duties under Healthcare and Legal Division to the rank-and-file
staff. Mapua lost about 95% of her work projects and job responsibilities. 9

Mapua consulted these work problems with SPI’s Human Resource Director, Lea Villanueva (Villanueva), and
asked if she can be transferred to another department within SPI. Subsequently, Villanueva informed Mapua that
there is an intra-office opening and that she would schedule an exploratory interview for her. However, due to
postponements not made by Mapua, the interview did not materialize.

On February 28, 2007, Mapua allegedly saw the new table of organization of the Corporate Development Division
which would be renamed as the Marketing Division. The new structure showed that Mapua’s level will be again
downgraded because a new manager will be hired and positioned between her rank and Raina’s. 10

Labor II – 1
On March 21, 2007, Raina informed Mapua over the phone that her position was considered redundant and
that she is terminated from employment effective immediately. Villanueva notified Mapua that she should cease
reporting for work the next day. Her laptop computer and company mobile phone were taken right away and her
office phone ceased to function. 11

Mapua was shocked and told Raina and Villanueva that she would sue them. Mapua subsequently called her lawyer
to narrate the contents of the termination letter,  which reads:
12

March 21, 2007

xxxx

Dear Ms. MAPUA,

xxxx

This notice of separation, effective March 21, 2007 should be regarded as redundancy. Your separation pay
will be computed as one month’s salary for every year of service, a fraction of at least six months will be considered
as one year.

Your separation pay will be released on April 20, 2007 subject to your clearance of accountabilities and as per
Company policy.

xxxx 13

Mapua’s lawyer, in a phone call, advised Villanueva that SPI violated Mapua’s right to a 30-day notice.

On March 27, 2007, Mapua filed with the Labor Arbiter (LA) a complaint for illegal dismissal, claiming reinstatement
or if deemed impossible, for separation pay. Afterwards, she went to a meeting with SPI, where she was given a
second termination letter,  the contents of which were similar to the first one.
14 15

On April 25, 2007, Mapua received through mail, a third Notice of Termination  dated March 21, 2007 but the
16

date of effectivity of the termination was changed from March 21 to April 21, 2007. It further stated that her
separation pay will be released on May 20, 2007 and a notation was inscribed, "refused to sign and acknowledge"
with unintelligible signatures of witnesses.

On May 13, 2007, a recruitment advertisement  of SPI was published in the Philippine Daily Inquirer (Inquirer
17

advertisement, for brevity). It listed all vacancies in SPI, including a position for Marketing Communications Manager
under Corporate Support – the same group where Mapua previously belonged.

SPI also sent a demand letter  dated May 15, 2007 to Mapua, asking her to pay for the remaining net book value of
18

the company car assigned to her under SPI’s car plan policy. Under the said plan, Mapua should pay the remaining
net book value of her car if she resigns within five years from start of her employment date.

In her Reply  and Rejoinder,  Mapua submitted an affidavit  and alleged that on July 16, 2007, Prime Manpower
19 20 21

Resources Development (Prime Manpower) posted an advertisement on the website of Jobstreet Philippines for the
employment of a Corporate Development Manager in an unnamed Business Process Outsourcing (BPO) company
located in Parañaque City. Mapua suspected that this advertisement was for SPI because the writing style used was
similar to Raina’s. She also claimed that SPI is the only BPO office in Parañaque City at that time. Thereafter, she
applied for the position under the pseudonym of "Jeanne Tesoro". On the day of her interview with Prime
Manpower’s consultant, Ms. Portia Dimatulac (Dimatulac), the latter allegedly revealed to Mapua that SPI contracted
Prime Manpower’s services to search for applicants for the Corporate Development Manager position.

Because of these developments, Mapua was convinced that her former position is not redundant. According to her,
she underwent psychiatric counseling and incurred medical expenses as a result of emotional anguish, sleepless
nights, humiliation and shame from being jobless. She also averred that the manner of her dismissal was
Labor II – 1
unprofessional and incongruous with her rank and stature as a manager as other employees have witnessed how
she was forced to vacate the premises on the same day of her termination.

On the other hand, SPI stated that the company regularly makes an evaluation and assessment of its
corporate/organizational structure due to the unexpected growth of its business along with its partnership with
ePLDT and the acquisition of CyMed.  As a result, SPI underwent a reorganization of its structure with the objective
22

of streamlining its operations. This was embodied in an Inter-Office Memorandum  dated August 28, 2006 issued by
23

the company’s Chief Executive Officer.  It was then discovered after assessment and evaluation that the duties of a
24

Corporate Development Manager could be performed/were actually being performed by other

officers/managers/departments of the company. As proof that the duties of Mapua are being/could be performed by
other SPI officers and employees, Villanueva executed an affidavit  attesting that Mapua’s functions are being
25

performed by other SPI managers and employees.

On March 21, 2007, the company, through Villanueva, served a written notice to Mapua, informing her of her
termination effective April 21, 2007. Mapua refused to receive the notice, thus, Villanueva made a notation "refused
to sign and acknowledge" on the letter. On that same day, SPI filed an Establishment Termination Report with the
Office of the Regional Director of the Department of Labor and Employment-National Capital Region (DOLE-NCR)
informing the latter of Mapua’s termination. Mapua was offered her separation and final pay, which she refused to
receive. Before the effective date of her termination, she no longer reported for work. SPI has not hired a Corporate
Development Manager since then.

SPI denied contracting the services of Prime Manpower for the hiring of a Corporate Development Manager and
emphasized that Prime Manpower did not even state the name of its client in the Jobstreet website. SPI also
countered that Dimatulac’s alleged revelation to Mapua that its client is SPI must be struck down as mere hearsay
because only Mapua executed an affidavit to prove that such disclosure was made. While SPI admitted the Inquirer
advertisement, the company stated that Mapua was a Corporate Development Manager and not a Marketing
Communications Manager, and that from the designations of these positions, it is obvious that the functions of one
are entirely different from that of the other. 26

LA Decision

On June 30, 2008, the LA rendered a Decision,  with the following dispositive portion:
27

WHEREFORE, prescinding from the foregoing, the redundancy of [Mapua’s] position being in want of factual basis,
her termination is therefore hereby declared illegal. Accordingly, she should be paid her backwages, separation pay
in lieu of reinstatement, moral and exemplary damages and attorney’s fees as follows:

a) Backwages:

03/21/07-06/30/08

₱67,996 x 15.30 mos. = ₱1,040,338.80

13th Month Pay:

₱1,040,338.80/12= ₱520,169.40 ₱1,560,508.20

b) Separation Pay: (1 mo. per year of service)

12/01/03-06/30/08 = 5.7 or 6 yrs.

₱67,996.00 x 6 = 407,976.00

c) Moral Damages: ₱500,000.00

d) Exemplary Damages: 250,000.00

e) Attorney’s Fees: 196,848.42

Labor II – 1
 Total Award ₱2,915,332.62

or a grand total of TWO MILLION NINE HUNDRED FIFTEEN THOUSAND THREE HUNDRED THIRTY-TWO and
62/100 (₱2,915,332.62)Pesos only.

Respondents are further ordered to award herein complainant the car assigned to her.

SO ORDERED. 28

Unrelenting, SPI appealed the LA decision to the National Labor Relations Commission (NLRC).

NLRC Ruling

On October 24, 2008, the NLRC rendered its Decision,  with the fallo, as follows:
29

WHEREFORE, the foregoing premises considered, the instant appeal is hereby GRANTED. The Decision appealed
from is REVERSED and SET ASIDE, and a new one is issued finding the appellants not guilty of illegal dismissal.

However, appellants are ordered to pay the sum of Three Hundred Thirty[-]Four Thousand Five Hundred
Thirty[-]Eight Pesos and Thirty[-]Four Centavos ([P]334,538.34) representing her separation benefits and final pay in
the amount of [P]203,988.00 and [P]130,550.34, respectively.

SO ORDERED. 30

In ruling so, the NLRC held that "[t]he determination of whether [Mapua’s] position as Corporate Development
Manager is redundant is not for her to decide. It essentially and necessarily lies within the sound business
management."  As early as August 28, 2006, Ernest Cu, SPI’s Chief Executive Officer, announced the corporate
31

changes in the company.

A month earlier, the officers held their Senior Management Strategic Planning Session with the theme,
"Transformation" or re-invention of SPI purposely to create an organizational structure that is streamlined, clear and
efficient.  In fact, Nolan and Raina, Mapua’s superiors were actually doing her functions with the assistance of the
32

pool of analysts, as attested to by Villanueva.

At odds with the NLRC decision, Mapua elevated the case to the CA by way of petition for certiorari, arguing that
based on evidence, the LA decision should be reinstated.

CA Ruling

Mapua’s petition was initially dismissed by the CA in its Resolution  dated March 25, 2009 for lack of counsel’s
33

MCLE Compliance number, outdated IBP and PTR numbers of counsel, and lack of affidavit of service attached to
the petition.

Mapua filed a motion for reconsideration which was granted by the CA, reinstating the petition in its
Resolution  dated May 26, 2009.
34

On October 28, 2009, the CA promulgated its Decision,  reinstating the LA’s decree, viz:
35

WHEREFORE, in view of the foregoing, the assailed decision dated October 24, 2008, as well as the resolution
dated December 23, 2008 of the National Labor Relations Commission in NLRC LAC No. 09-003262-08 (8) NLRC
NCR CN. 00-03-02761-07 are hereby REVERSED and SET ASIDE. The decision of the Labor Arbiter dated June
30, 2008 in NLRC-NCR Case No. 00-03-02761-07 is hereby REINSTATED with MODIFICATION in that the amount
of 13th month pay of [P]520,169.40 is hereby reduced to [P]86,694.90.

Labor II – 1
SO ORDERED. 36

SPI’s motion for reconsideration was denied on January 18, 2010. Thus, through a petition for review on certiorari,
SPI submitted the following grounds for the consideration of this Court:

THE CA DECLARED AS ILLEGAL [MAPUA’S] SEPARATION FROM SERVICE SOLELY ON THE BASIS
OF HER SELF-SERVING AND UNFOUNDED ALLEGATION OF A SUPPOSED JOB ADVERTISEMENT

II

THE CA COMPLETELY DISREGARDED THE FACT THAT [MAPUA] WAS VALIDLY SEPARATED FROM
SERVICE ON THE GROUND OF REDUNDANCY WHICH IS AN AUTHORIZED CAUSE FOR
TERMINATION OF EMPLOYMENT UNDER ARTICLE 283 OF THE LABOR CODE AND PREVAILING
JURISPRUDENCE

III

THE CA FOUND THAT [MAPUA] WAS NOT ACCORDED HER RIGHT TO DUE PROCESS IN UTTER
DEROGATION OF THE APPLICABLE PROVISIONS OF THE LABOR CODE AND THE PERTINENT
JURISPRUDENCE

IV

THE CA COMPLETELY AFFIRMED THE AWARDS OF SEPARATION PAY, BACKWAGES, DAMAGES

AND ATTORNEY’S FEES IN THE [LA’S] DECISION IN TOTAL DISREGARD OF THE APPLICABLE LAW
AND JURISPRUDENCE

THE CA UPHELD THE [LA’S] DECISION HOLDING INDIVIDUAL PETITIONER SOLIDARILY AND
PERSONALLY LIABLE TO [MAPUA] WITHOUT SHOWING ANY BASIS THEREFOR 37

Our Ruling

The Court sustains the CA’s ruling.

Mapua was dismissed from employment supposedly due to redundancy. However, she contended that her position
as Corporate Development Manager is not redundant. She cited that SPI was in fact actively looking for her
replacement after she was terminated. Furthermore, SPI violated her right to procedural due process when her
termination was made effective on the same day she was notified of it.

Article 283 of the Labor Code provides for the following:

ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the
employment of any employee due to installation of labor-saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the
purpose of circumventing the provisions of this Title, by serving a written notice on the worker and the Department of
Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to
installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least 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 and financial reverses, the separation pay shall be

Labor II – 1
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered as one (1) whole year. (Emphasis ours)

Expounding on the above requirements of written notice and separation pay, this Court in Asian Alcohol Corporation
v. NLRC  pronounced that for a valid implementation of a redundancy program, the employer must comply with the
38

following requisites: (1) written notice served on both the employee and the DOLE at least one month prior to the
intended date of termination; (2) payment of separation pay equivalent to at least one month pay or at least one
month pay for every year of service, whichever is higher; (3) good faith in abolishing the redundant position; and (4)
fair and reasonable criteria in ascertaining what positions are to be declared redundant. 39

Anent the first requirement which is written notice served on both the employee and the DOLE at least one month
prior to the intended date of termination, SPI had discharged the burden of proving that it submitted a notice to the
DOLE on March 21, 2007, stating therein that the effective date of termination is on April 21, 2007. It is, however,
quite peculiar that two kinds of notices were served to Mapua. One termination letter stated that its date of effectivity
is on the same day, March 21, 2007. The other termination letter sent through mail to Mapua’s residence stated that
the effective date of her termination is on April 21, 2007.

Explaining the discrepancy, SPI alleged that the company served a notice to Mapua on March 21, 2007, which
stated that the effective date of termination is on April 21, 2007. However she refused to acknowledge or accept the
letter. Later on, Mapua requested for a copy of the said letter but due to inadvertence and oversight, a draft of the
termination letter bearing a wrong effectivity date was given to her. To correct the oversight, a copy of the original
letter was sent to her through mail.40

Our question is, after Mapua initially refused to accept the letter, why did SPI make a new letter instead of just giving
her the first one – which the Court notes was already signed and witnessed by other employees? Curiously, there
was neither allegation nor proof that the original letter was misplaced or lost which would necessitate the drafting of
a new one. SPI did not even explain in the second letter that the same was being sent in lieu of the one given to her.
Hence, SPI must shoulder the consequence of causing the confusion brought by the variations of termination letters
given to Mapua.

Also, crucial to the determination of the effective date of termination was that Mapua was very specific as regards
what happened immediately after: "Ms. Villanueva had Ms. Mapua’s assigned laptop computer and cellphone
immediately taken by Human Resources supervisor, Ms. Dhang Rondael. Within about an hour, Ms. Mapua’s
landline phone ceased to function after Ms. Villanueva’s and Mr. Raina’s announcement." Her company I.D. was
taken away from her that very same day.  To counter these statements, SPI merely stated that before the effective
41

date of Mapua’s termination on April 21, 2007, she no longer reported for work. To this Court, this is insufficient
rebuttal to the precise narrative of Mapua.

On the matter of separation pay, there is no question that SPI indeed offered separation pay to Mapua, but the offer
must be accompanied with good faith in the abolishment of the redundant position and fair and reasonable criteria in
ascertaining the redundant position. It is insignificant that the amount offered to Mapua is higher than what the law
requires because the Court has previously noted that "a job is more than the salary that it carries. There is a
psychological effect or a stigma in immediately finding one’s self laid off from work."42

Moving on to the issue of the validity of redundancy program, SPI asserted that an employer has the unbridled right
to conduct its own business in order to achieve the results it desires. To prove that Villanueva’s functions are
redundant, SPI submitted an Inter-Office Memorandum  and affidavit executed by its Human Resources Director,
43

Villanueva. The pertinent portions of the memorandum read:

ORGANIZATION STRUCTURE

One of the most important elements of successfully effecting change is to create an organization structure that is
streamlined, clear and efficient. We think we have done that and the new format is illustrated in Attachment A. The
upper part shows my direct reports who are heads of the various shared services departments and the lower part
shows the set up of the business units. The important features of the structure are discussed in the following
sections. For brevity, I have purposely not summarized the roles that will remain the same.

Labor II – 1
 xxxx

Corporate Development

Peter Maquera will continue to head Corporate Development but the group’s scope will be expanded to include
Marketing across the whole company. Essentially, Marketing will be taken out of the business units and centralized
under Corporate Development. Elizabeth Nolan will move from her role as Publishing’s VP of Sales and Marketing
to become the head of Global Marketing. The unit will continue to focus on strengthening the SPI brand, while at the
same time maximizing the effectiveness of our spending. Josie Gonzales, head of Corporate Relations, will also be
transitioned to Corporate Development. 44

The memorandum made no mention that the position of the Corporate Development Manager or any other position
would be abolished or deemed redundant. In this regard, may the affidavit of Villanueva which enumerated the
various functions of a Corporate Development Manager being performed by other SPI employees be considered as
sufficient proof to uphold SPI’s redundancy program?

In AMA Computer College, Inc. v. Garcia, et al.,  the Court held that the presentation of the new table of the
45

organization and the certification of the Human Resources Supervisor that the positions occupied by the retrenched
employees are redundant are inadequate as evidence to support the college’s redundancy program. The Court
quotes the related portion of its ruling:

In the case at bar, ACC attempted to establish its streamlining program by presenting its new table of organization.
ACC also submitted a certification by its Human Resources Supervisor, Ma. Jazmin Reginaldo, that the functions
and duties of many rank and file employees, including the positions of Garcia and Balla as Library Aide and
Guidance Assistant, respectively, are now being performed by the supervisory employees. These, however, do not
satisfy the requirement of substantial evidence that a reasonable mind might accept as adequate to support a
conclusion. As they are, they are grossly inadequate and mainly self-serving. More compelling evidence would have
been a comparison of the old and new staffing patterns, a description of the abolished and newly created positions,
and proof of the set business targets and failure to attain the same which necessitated the reorganization or
streamlining.  (Citations omitted and emphasis ours)
46

Also connected with the evidence negating redundancy was SPI’s publication of job vacancies after Mapua was
terminated from employment. SPI maintained that the CA erred when it considered Mapua’s self-serving affidavit as
regards the Prime Manpower advertisement because the allegations therein were based on Mapua’s unfounded
suspicions. Also, the failure of Mapua to present a sworn statement of Dimatulac renders the former’s statements
hearsay.

Even if we disregard Mapua’s affidavit as regards the Prime Manpower advertisement, SPI admitted that it caused
the Inquirer advertisement for a Marketing Communications Manager position.  Mapua alleged that this
47

advertisement belied the claim of SPI that her position is redundant because the Corporate Development division
was only renamed to Marketing division.

Instead of explaining how the functions of a Marketing Communications Manager differ from a Corporate
Development Manager, SPI hardly disputed Mapua when it stated that, "[j]udging from the titles or designation of the
positions, it is obvious that the functions of one are entirely different from that of the other."  SPI, being the
48

employer, has possession of valuable information concerning the functions of the offices within its organization.
Nevertheless, it did not even bother to differentiate the two positions.

Furthermore, on the assumption that the functions of a Marketing Communications Manager are different from that
of a Corporate Development Manager, it was not even discussed why Mapua was not considered for the position.
While SPI had no legal duty to hire Mapua as a Marketing Communications Manager, it could have clarified why she
is not qualified for that position. In fact, Mapua brought up the subject of transfer to Villanueva and Raina several
times prior to her termination but to no avail. There was even no showing that Mapua could not perform the duties of
a Marketing Communications Manager.

Labor II – 1
Therefore, even though the CA based its ruling only on the Prime Manpower advertisement coupled with the
purported disclosure to Mapua, the Court holds that the confluence of other factors supports the said ruling.

The Court does not agree with the rationalization of the NLRC that "[i]f it were true that her position was not
redundant and indispensable, then the company must have already hired a new one to replace her in order not to
jeopardize its business operations. The fact that there is none only proves that her position was not necessary and
therefore superfluous." 49

What the above reasoning of the NLRC failed to perceive is that "[o]f primordial consideration is not the
nomenclature or title given to the employee, but the nature of his functions."  "It is not the job title but the actual
50

work that the employee performs."  Also, change in the job title is not synonymous to a change in the functions. A
51

position cannot be abolished by a mere change of job title. In cases of redundancy, the management should
adduce evidence and prove that a position which was created in place of a previous one should pertain to
functions which are dissimilar and incongruous to the abolished office.

Thus, in Caltex (Phils.), Inc. (now Chevron Phils., Inc.) v. NLRC,  the Court dismissed the employer’s claim of
52

redundancy because it was shown that after declaring the employee’s position of Senior Accounting Analyst as
redundant, the company opened other accounting positions (Terminal Accountant and Internal Auditor) for hiring.
There was no showing that the private respondent therein could not perform the functions demanded of the vacant
positions, to which he could be transferred to instead of being dismissed.

On the issue of the solidary obligation of the corporate officers impleaded vis-à-vis the corporation for Mapua’s
illegal dismissal, "[i]t is hornbook principle that personal liability of corporate directors, trustees or officers attaches
only when: (a) they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross
negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its
stockholders or other persons; (b) they consent to the issuance of watered down stocks or when, having knowledge
of such issuance, do not forthwith file with the corporate secretary their written objection; (c) they agree to hold
themselves personally and solidarily liable with the corporation; or (d) they are made by specific provision of law
personally answerable for their corporate action." 53

While the Court finds Mapua’s averments against Villanueva, Nolan, Maquera and Raina as detailed and
exhaustive, the Court takes notice that these are mostly suppositions on her part. Thus, the Court cannot apply the
above-enumerated exceptions when a corporate officer becomes personally liable for the obligation of a corporation
to this case.

With respect to the vehicle under the company car plan which the LA awarded to Mapua, the Court rules that the
subject matter is not within the jurisdiction of the LA but with the regular courts, the remedy being civil in nature
arising from a contractual obligation, following this Court’s ruling in several cases. 54

The Court sustains the CA’s award of moral and exemplary damages. Award of moral and exemplary damages for
an illegally dismissed employee is proper where the employee had been harassed and arbitrarily terminated by the
employer. Moral damages may be awarded to compensate one for diverse injuries such as mental anguish,
besmirched reputation, wounded feelings, and social humiliation occasioned by the employer’s unreasonable
dismissal of the employee. The Court has consistently accorded the working class a right to recover damages for
unjust dismissals tainted with bad faith; where the motive of the employer in dismissing the employee is far from
noble.  The award of such damages is based not on the Labor Code but on Article 220 of the Civil Code.  However,
1âwphi1
55

the Court observes that the CA decision affirming the LA’s award of ₱500,000.00 and ₱250,000.00 as moral and
exemplary damages, respectively, is evidently excessive because the purpose for awarding damages is not to
enrich the illegally dismissed employee. Consequently, the Court hereby reduces the amount of ₱50,000.00 each as
moral and exemplary damages. 56

Mapua is also entitled to attorney’s fees but the Court is modifying the amount of ₱196,848.42 awarded by the LA
and fix such attorney’s fees in the amount of ten percent (10%) of the total monetary award, pursuant to Article
111  of the Labor Code.
57

WHEREFORE, the Decision dated October 28, 2009 and Resolution dated January 18, 2010 of the Court of
Appeals in CA-G.R. SP. No. 107879 are hereby AFFIRMED with the following MODIFICATIONS:
Labor II – 1
 1. Moral and exemplary damages is hereby reduced to ₱50,000.00 each; and

2. Attorney's fees shall be computed at ten percent (10%) of the aggregate monetary award.

The monetary awards shall earn interest at the rate of six percent (6%) per annum from the time of respondent
Victoria K. Mapua's illegal dismissal until finality of this Decision, and twelve percent (12%) legal interest thereafter
until fully paid.

Petitioner SPI Technologies, Inc. shall be liable for the foregoing awards.

Labor II – 1
 37.) G.R. No. 213299, April 19, 2016

PNCC SKYWAY CORPORATION, Petitioner, v. THE SECRETARY OF LABOR AND EMPLOYMENT AND PNCC

SKYWAY CORPORATION EMPLOYEES UNION, Respondents.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated September 30, 2013 and the Resolution3 dated
June 11, 2014 of the Court of Appeals (CA) in CA-G.R. SP No. 111201, which affirmed the Decision4 dated August 29,
2008 and the Resolution5 dated August 26, 2009 of the Secretary of the Department of Labor and Employment (DOLE)
holding petitioner PNCC Skyway Corporation (PSC) liable for P30,000.00 as indemnity to each of its terminated
employees, for failure to comply with the thirty (30)-day notice requirement under Article 298 (formerly Article 283)
of the Labor Code, as amended.6

The Facts

In October 1977, the Republic of the Philippines, through the Toll Regulatory Board (TRB), and the Philippine National
Construction Corporation7 (PNCC) entered into a Toll Operation Agreement (TOA)8 for the latter's operation and
maintenance of the South Metro Manila Skyway (Skyway).9

On November 27, 1995, a Supplemental TOA (STOA)10 was executed by the TRB, PNCC, and Citra Metro Manila
Tollways Corporation (CITRA), whereby CITRA, as an incoming investor, agreed, under a build-and-transfer
scheme,11 to finance, design, and construct the Skyway.12 However, PNCC retained the right to operate and maintain
the toll facilities,13 and for such purpose, undertook to incorporate a subsidiary company that would assume its rights
and obligations under the STOA:
chanRoblesvirtualLawlibrary

6.16. Operator's Subsidiary Company

Subject to all relevant existing laws, rules, and regulations, [PNCC] shall incorporate a subsidiary company (the
"Subsidiary Company") at least 6 months prior to the Partial Operation Date [PNCC] shall be the sole stockholder of
the Subsidiary Company. The powers and functions of the Subsidiary Company shall only be to undertake and perform
the obligations of [PNCC] under this Agreement, including without limitation Operation and Maintenance.14

Thus, on December 15, 1998, PSC was incorporated as a subsidiary of PNCC to operate the Skyway on PNCC's behalf.
As such, it was tasked to maintain the toll facilities, ensure traffic safety, and collect toll fees at the Skyway.15

On July 18, 2007, the TRB, PNCC, and CITRA entered into an Amended STOA (ASTOA).16 Under the ASTOA, the
operation and management of the Skyway would be transferred from PSC to a new Replacement Operator, which
turned out to be the Skyway O & M Corporation (SOMCO).17 A transition period of 5 1/2 months was provided
commencing on the date of signing of the ASTOA until December 31, 2007, during which period, PSC continued
to operate the Skyway.18

In line with the above-mentioned transfer, PSC, on December 28, 2007, issued termination letters to its employees
and filed a notice of closure with the DOLE - National Capital Region, advising them that it shall cease to operate and
maintain the Skyway, and that the services of the employees would be consequently terminated effective
January 31, 2008.19 In this regard, PSC offered its employees a separation package consisting of 250% of their basic
monthly salary for every year of service, gratuity pay of P40,000.00 each, together with all other remaining benefits
such as 13th month pay, rice subsidy, cash conversion of leave credits, and medical reimbursement.20

On the same date, the PSC Employees Union (PSCEU) filed a Notice of Strike on the ground of unfair labor practice
resulting in union busting and dismissal of workers. On December 31, 2007, the DOLE Secretary intervened and
assumed jurisdiction over the labor incident.21

The DOLE Secretary's Ruling

In a Decision22 dated August 29, 2008, the DOLE Secretary dismissed the charges of unfair labor practice and union
busting, as well as the counter-charges of illegal strike, but ordered PSC to pay its terminated employees P30,000.00
each as indemnity after finding that the notices of their dismissal were invalid.23

The DOLE Secretary held that while there was a valid and sufficient legal basis for PSC's closure - as it was a mere

Labor II – 1
consequence of the termination of its contract to operate and maintain the Skyway in view of the amendment of the
STOA - PSC, nonetheless, foiled to comply with the thirty (30)-day procedural notice requirement in terminating its
employees, as provided under Article 283 (now, Article 298) of the Labor Code.24 It was observed that while PSC
stated in the notices of termination to the employees (as well as in the notice to the DOLE) that the dismissal of the
employees would take effect on January 31, 2008, it admitted that it actually ceased to operate and maintain the
Skyway upon its turnover to SOMCO on December 31, 2007.25 As such, PSC fixed the termination date at January 31,
2008 only to make it appear that it was complying with the one-month notice requirement, Thus, citing the case
of Agabon v. National Labor Relations Commission (Agabon),26 the DOLE Secretary ordered PSC to pay each of its
terminated employees P30,000.00 as indemnity.27 cralawred

On September 12, 2008, PSC filed a Motion for Partial Reconsideration and Clarification,28 while the PSCEU filed a
Motion for Reconsideration,29 which were both denied in a Resolution30 dated August 26, 2009.31 Dissatisfied, PSC
elevated the case to the Court of Appeals (CA) through a petition for certiorari.32

The CA Ruling

In a Decision33 dated September 30, 2013, the CA affirmed34 the DOLE Secretary's ruling after observing that PSC held
inconsistent and conflicting positions with regard to the date of termination of its employees' services.35

The CA pointed out that in the Establishment Termination Report submitted to the DOLE, PSC stated that it shall close
or shut down its operations effective January 31, 2008. However, in its Position Paper submitted to the DOLE, PSC
stated that it "ceased to operate and maintain the [Skyway] upon its turnover to SOMCO effective December 31,
2007."36 According to the CA, the apparent inconsistency as to the date of effectivity of the dismissal of the PSC
employees must be resolved in favor of the employees who must then be deemed to have been terminated on
December 31, 2007, consistent with Article 437 of the Labor Code which states that all doubts shall be resolved in favor
of labor.38

The CA further held that it is of no moment that the PSC employees were paid their salaries and benefits for the whole
month of January 2008 since they were already out of service as of December 31, 2007, explaining too that this
defeated the purpose behind the thirty (30)-day notice requirement, which is to give the employees time to prepare
for the eventual loss of their employment.39

Anent PSC's argument that the PSCEU had been informed as early as September 2007 of the impending takeover of
the operation of the Skyway by a new operator, the CA cited Smart Communications, Inc. v. Astorga 40 (Smart
Communications, Inc.) and thereby, ruled that "actual knowledge of the reorganization cannot replace the formal and
written notice required by law."41

The CA denied PSC's motion for reconsideration42 in a Resolution43 dated June 11, 2014; hence, the instant petition.

The Issue Before the Court

The sole issue in this case is whether or not the CA erred in affirming the DOLE Secretary's ruling that PSC failed to
comply with the 30-day notice requirement under Article 298 (formerly, Article 283) of the Labor Code, as amended.

The Court's Ruling

The petition is meritorious.

Closure of business is an authorized cause for termination of employment, Article 298 (formerly, Article 283) of the
Labor Code, as amended, reads:
chanRoblesvirtualLawlibrary

ART. 298. Closure of Establishment and Reduction of Personnel. - The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry
of Labor and Employment at least one (1) month before the intended date thereof. x x x. 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. (Emphases supplied)
In this relation, jurisprudence provides that "[t]he determination to cease operations is a prerogative of management
which the State does not usually interfere with, as no business or undertaking must be required to continue operating
simply because it has to maintain its workers in employment, and such act would be tantamount to a taking of
property without due process of law. As long as the company's exercise of the same is in good faith to advance its
Labor II – 1
interest and not for the purpose of circumventing the rights of employees under the law or a valid agreement, such
exercise will be upheld."44

Procedurally, Article 298 (formerly, Article 283) of the Labor Code, as amended provides for three (3)
requirements to properly effectuate termination on the ground of closure or cessation of business
operations. These are: (a) service of a written notice to the employees and to the DOLE at least one (1)
month before the intended date of termination; (b) the cessation of business must be bona fide in
character; and (c) payment to the employees of termination pay amounting to one (1) month pay or at
least one-half month pay for every year of service, whichever is higher.45

Case law has settled that an employer who terminates an employee for a valid cause but does so through invalid
procedure is liable to pay the latter nominal damages.46 In Agabon, the Court pronounced that, where the dismissal is
for a just cause, the lack of statutory due process should not nullify the dismissal, or render it illegal, or
ineffectual.47 However, the employer should indemnify the employee for the violation of his statutory rights. Thus,
in Agabon, the employer was ordered to pay the employee nominal damages in the amount of
P30,000.00.48 Proceeding from the same ratio, the Court modified Agabon in the case of Jaka Food Processing
Corporation v. Pacot49 (Jaka) where it created a distinction between procedurally defective dismissals due to a just
cause, on the one hand, and those due to an authorized cause, on the other. In Jaka, it was explained that if the
dismissal is based on a just cause under Article 282 (now, Article 297) of the Labor Code but the employer failed to
comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal
process was, in effect, initiated by an act imputable to the employee; if the dismissal is based on an authorized cause
under Article 283 (now, Article 298) of the Labor Code but the employer failed to comply with the notice requirement,
the sanction should be stiffer because the dismissal process was initiated by the employer's exercise of his
management prerogative. Hence, in Jaka, where the employee was dismissed for an authorized cause of retrenchment
- as contradistinguished from the employee in Agabon who was dismissed for a just cause of neglect of duty - the
Court ordered the employer to pay the employee nominal damages at the higher amount of P50,000.00.50

The sole issue in this case is whether or not PSC properly complied with the thirty (30)-day prior notice
rule, which is the first prong of the termination procedure under Article 298 (formerly Article 283) of the Labor Code,
as amended. The Court rules in the affirmative; hence, there is no basis to award any indemnity in favor of
PSC's terminated employees.

As admitted by both parties, the PSC employees and the DOLE were notified on December 28, 2007 that PSC
intended to cease operations on January 31, 2008. The PSC employees and the DOLE were, therefore,
notified 34 days ahead of the impending closure of PSC. Clearly, the mere fact that PSC turned over the operation
and management of the Skyway to SOMCO and ceased business operations on December 31, 2007, should not be
taken to mean that the FSC employees were ipso facto terminated on the same date. The employees were
notified that despite the cessation of its operations on December 31, 2007 - which, as a consequence thereof, would
result in the needlessness of their services - the effective date of their termination from employment would be
on January 31, 2008:
chanRoblesvirtualLawlibrary

Pursuant to the amended Supplemental Toll Operations Agreement entered into on July 18, 2007 by and among the
Republic of the Philippines thru the Toll Regulatory Board, Philippine National Construction Corporation and Citra Metro
Manila Tollways Corporation, a new Operation and Maintenance Company (OMCO) has been nominated to replace the
PNCC Skyway Corporation (PSC). As a consequence thereof, PSC shall then cease to operate and maintain the
South Metro Manila Skyway upon its turn over to the new OMCO which may happen not earlier than
December 31, 2007. It is unfortunate therefore that all PSC employees shall be separated from service but shall be
given a generous separation package more than, what the law provides.

In this regard please be advised that your employment with PNCC Skyway Corporation will be terminated effective
January 31, 2008. In consideration thereof, you will accordingly receive the following separation package.

x x x x51 (Emphases and underscoring supplied)

That the effectivity of the PSC employees' termination is on January 31, 2008, and not on December 31,
2007, is lucidly evinced by the unrefuted fact that they were still paid their salaries and benefits for the
whole month of January 2008.52 Surely, it would go against the stream of practical business logic to retain
employees on payroll a month after they had already been terminated.

On top of that, it deserves mentioning that PSC undisputedly paid its dismissed employees separation pay in amounts
more than that required by law. As the records show, PSC's separation package to its employees was a generous one
consisting of no less than 250% of the basic monthly pay per year of service, a gratuity pay of P40,000.00, rice
subsidy, cash conversion of vacation and sick leaves and medical reimbursement.53 On the other hand, the legally-
mandated rate for separation pay provided under Article 298 (formerly, Article 283) of the Labor Code, as amended,
in cases such as the present, is equivalent to "one (1) month pay or at least one-half (1/2) month pay for every year
of service, whichever is higher."
Labor II – 1
Ultimately, it was within PSC's prerogative and discretion as employer to retain the services of its employees for one
month after the turnover date to SOMCO and to continue paying their salaries and benefits corresponding to that
period even when there is no more work to be done, if only "to ensure a smooth transition and gradual phasing in of
the new operator, which had yet to familiarize itself with the business."54

Case law teaches that an employer may opt not to require the dismissed employees to report for work
during the 30-day notice period.

In Associated Labor Unions - VIMCONTU v. National Labor Relations Commission,55 the Court held that there was
"more than substantial compliance" with the notice requirement where a written notice to the employees on August 5,
1983 had informed them that their services would cease at the end of that month but that they would nevertheless be
paid their salaries and benefits for five days, from September 1 to 5, 1983, even if they rendered no service for the
period.56

Similarly, in Kasapian ng Malayang Manggagawa sa Coca-Cola (KASAMMA-CCO)-CFW Local 245 v. CA,57 the Court
dismissed the union employees' argument that there was non-compliance with the one-month notice because they
were no longer allowed to report for work effective immediately upon receipt of the notice of termination, ruling
therein that the payment of salaries from December 9, 1999 to February 29, 2000 although the employees did not
render service for the period is, by analogy, "more than substantial compliance with the law."58

To clarify, the case of Smart Communications, Inc., which was cited by the CA in holding that the actual knowledge by
the PSCEU of the impending takeover cannot replace the formal written notice required by law, is inapplicable to this
case. In Smart Communications, Inc., the employee received the notice of her dismissal only two (2) weeks before its
effectivity date although it was issued by the employer at least thirty (30) days prior to the intended date of her
dismissal. Given that the employee was evidently shortchanged of the mandated period of notice, the Court ruled that
actual knowledge could not replace the formal written notice required by law.59

In contrast, PSC complied with the mandated thirty (30)-day notice requirement. Although PSC informed
its employees that it would be turning over its operations to SOMCO not earlier than December 31, 2007,
they were duly notified that the effective date of their termination was set on January 31, 2008. In light
of valid business reasons, i.e., the transfer of operations to SOMCO pursuant to the ASTOA, PSC asked its
employees not to report for work beginning December 31, 2007 but were still retained on payroll until
January 31, 2008. Evidently, their employment with PSC did not cease by the sole reason that they were
told not to render any service.

In addition, since the employees were not reporting for work although retained on payroll, they had, in fact, more free
time to look for job opportunities elsewhere after December 31, 2007 up until January 31, 2008. As aptly observed by
PSC:
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Indeed, instead of reporting in their office and wasting time doing nothing in view of the cessation of PSC's business
operation, the concerned employees can and actually devoted one month to look for another employment with
pay.60 ChanRoblesVirtualawlibrary

This meets the purpose of the notice requirement as enunciated in, among others, the case of G.J.T. Rebuilders
Machine Shop v. Ambos:61
Notice of the eventual closure of establishment is a "personal right of the employee to be personally informed of his
[or her] proposed dismissal as well as the reasons therefor." The reason for this requirement is to "give the
employee some time in prepare for the eventual loss of his [or her] job." 62 (Emphasis supplied)
Ail told, considering that PSC had complied with Article 298 (formerly, Article 283) of the Labor Code, as amended,
the indemnity award in favor of the terminated employees was grossly improper and must therefore be nullified, in
this respect, the DOLE Secretary gravely abused its discretion and the CA erred in ruling otherwise. When, a lower
court or tribunal patently violates the Constitution, the law, or existing jurisprudence, grave abuse of discretion is
committed,63 as in this case. chanrobleslaw

WHEREFORE, the petition is GRANTED. The Decision dated September 30, 2013 and the Resolution dated June 11,
2014 of the Court of Appeals in CA-G.R. SP No. 111201 are hereby REVERSED and SET ASIDE.

Labor II – 1
38.) G.R. No. 158637             April 12, 2006

MARICALUM MINING CORPORATION, Petitioner,

vs.
ANTONIO DECORION, Respondent.

DECISION

TINGA, J.:

This Petition1 dated July 8, 2003 filed by Maricalum Mining Corporation (Maricalum Mining) assails the Decision2 of
the Court of Appeals which upheld the labor arbiter’s finding that respondent, Antonio Decorion (Decorion), was
constructively dismissed and therefore entitled to reinstatement and backwages.

There is no substantial dispute on the operative facts of this case.

Decorion was a regular employee of Maricalum Mining who started out as a Mill Mechanic assigned to the
Concentrator Maintenance Department and was later promoted to Foreman I. On April 11, 1996, the Concentrator
Maintenance Supervisor called a meeting which Decorion failed to attend as he was then supervising the workers
under him. Because of his alleged insubordination for failure to attend the meeting, he was placed under preventive
suspension on the same day. He was also not allowed to report for work the following day.

A month after or on May 12, 1996, Decorion was served a Notice of Infraction and Proposed Dismissal to enable
him to present his side. On May 15, 1996, he submitted to the Personnel Department his written reply to the notice.

A grievance meeting was held upon Decorion’s request on June 5, 1996, during which he manifested that he failed
to attend the meeting on April 11, 1996 because he was then still assigning work to his men. He maintained that he
has not committed any offense and that his service record would show his efficiency.

On July 23, 1996, Decorion filed before the National Labor Relations Commission (NLRC) Regional Arbitration
Branch VI of Bacolod City a complaint for illegal dismissal and payment of moral and exemplary damages and
attorney’s fees.3

In the meantime, the matter of Decorion’s suspension and proposed dismissal was referred to Atty. Roman G.
Pacia, Jr., Maricalum Mining’s Chief and Head of Legal and Industrial Relations, who issued a memorandum on
August 13, 1996, recommending that Decorion’s indefinite suspension be made definite with a warning that a
repetition of the same conduct would be punished with dismissal. Maricalum Mining’s Resident Manager issued a
memorandum on August 28, 1996, placing Decorion under definite disciplinary suspension of six (6) months which
would include the period of his preventive suspension which was made to take effect retroactively from April 11,
1996 to October 9, 1996.

On September 4, 1996, Decorion was served a memorandum informing him of his temporary lay-off due to
Maricalum Mining’s temporary suspension of operations and shut down of its mining operations for six (6) months,
with the assurance that in the event of resumption of operations, he would be reinstated to his former position
without loss of seniority rights.

Decorion, through counsel, wrote a letter to Maricalum Mining on October 8, 1996, requesting that he be reinstated
to his former position. The request was denied with the explanation that priority for retention and inclusion in the
skeleton force was given to employees who are efficient and whose services are necessary during the shutdown.

Conciliation proceedings having failed to amicably settle the case, the labor arbiter rendered a decision4 dated
November 26, 1998, finding Decorion’s dismissal illegal and ordering his reinstatement with payment of backwages
and attorney’s fees. According to the labor arbiter, Decorion’s failure to attend the meeting called by his supervisor
did not justify his preventive suspension. Further, no preventive suspension should last longer than 30 days.

Labor II – 1
The NLRC, however, reversed the labor arbiter’s decision and dismissed Decorion’s complaint.5 The reversal was
premised on the finding that the case was litigated solely on Decorion’s allegation that he was dismissed on April 11,
1996. However, during the grievance meeting held on June 5, 1996, Decorion left it up to management to decide his
fate, indicating that as of that time, there was no decision to terminate his services yet. According to the NLRC, to
consider the events that transpired after April 11, 1996 and make the same the basis for the finding of illegal
dismissal would violate Maricalum Mining’s right to due process.

On petition for certiorari with the Court of Appeals, the decision of the labor arbiter was reinstated. The appellate
court held that Decorion was placed under preventive suspension immediately after he failed to attend the meeting
called by his supervisor on April 11, 1996. At the time he filed the complaint for illegal dismissal on July 23, 1996, he
had already been under preventive suspension for more than 100 days in violation of Sec. 9, Rule XXIII, Book V of
the Omnibus Rules Implementing the Labor Code (Implementing Rules) which provides that no preventive
suspension shall last longer than 30 days.

The appellate court denied Maricalum Mining’s motion for reconsideration in its Resolution6 dated May 16, 2003.

In this petition, Maricalum Mining insists that Decorion was not dismissed but merely preventively suspended on
April 11, 1996. Citing the case of Valdez v. NLRC,7 petitioner contends that constructive dismissal occurs only after
the lapse of more than six (6) months from the time an employee is placed on a "floating status" as a result of
temporary preventive suspension from employment. Thus, it goes on to argue, since Decorion was suspended for
less than six (6) months, his suspension was legal.

Decorion filed a Comment8 dated December 5, 2003, maintaining that he was dismissed from employment on April
11, 1996 as he was then prevented from reporting for work. He avers that had the intention of Maricalum Mining
been to merely suspend him, it could have manifested this intention by at least informing him of his suspension. As it
happened, he was not served with any notice relative to why he was disallowed to report for work. The grievance
meeting conducted on June 5, 1996 was allegedly called only after he had repeatedly requested reconsideration of
his dismissal.

Maricalum Mining filed a Reply9 dated April 22, 2004 in reiteration of its arguments.

We reject the petition.

Sections 8 and 9 of Rule XXIII, Book V of the Implementing Rules provide as follows:

Section 8. Preventive suspension. --- The employer may place the worker concerned under preventive suspension if
his continued employment poses a serious and imminent threat to the life or property of the employer or his co-
workers.

Section 9. Period of Suspension --- No preventive suspension shall last longer than thirty (30) days. The
employer shall thereafter reinstate the worker in his former or in a substantially equivalent position or the employer
may extend the period of suspension provided that during the period of extension, he pays the wages and other
benefits due to the worker. In such case, the worker shall not be bound to reimburse the amount paid to him during
the extension if the employer decides, after completion of the hearing, to dismiss the worker. [Emphasis supplied.]

The Rules are explicit that preventive suspension is justified where the employee’s continued employment
poses a serious and imminent threat to the life or property of the employer or of the employee’s co-workers.
Without this kind of threat, preventive suspension is not proper.

In this case, Decorion was suspended only because he failed to attend a meeting called by his supervisor.
There is no evidence to indicate that his failure to attend the meeting prejudiced his employer or that his
presence in the company’s premises posed a serious threat to his employer and co-workers. The preventive
suspension was clearly unjustified.10

What is more, Decorion’s suspension persisted beyond the 30-day period allowed by the Implementing Rules.
In Premiere Development Bank v. NLRC,11  private respondent’s suspension lasted for more than 30 days counted from the
Labor II – 1
time she was placed on preventive suspension on March 13, 1986 up to the last day of investigation on April 23, 1986. The
Court ruled that preventive suspension which lasts beyond the maximum period allowed by the Implementing Rules
amounts to constructive dismissal.

Similarly, from the time Decorion was placed under preventive suspension on April 11, 1996 up to the time a
grievance meeting was conducted on June 5, 1996, 55 days had already passed. Another 48 days went by before
he filed a complaint for illegal dismissal on July 23, 1996. Thus, at the time Decorion filed a complaint for illegal
dismissal, he had already been suspended for a total of 103 days.

Maricalum Mining’s contention that there was as yet no illegal dismissal at the time of the filing of the
complaint is evidently unmeritorious. Decorion’s preventive suspension had already ripened into constructive
dismissal at that time. While actual dismissal and constructive dismissal do take place in different fashion, the legal
consequences they generate are identical.

Decorion’s employment may not have been actually terminated in the sense that he was not served walking papers
but there is no doubt that he was constructively dismissed as he was forced to quit because continued employment
was rendered impossible, unreasonable or unlikely12 by Maricalum Mining’s act of preventing him from reporting for
work.1avvphil.net

Petitioner’s reliance on Valdez v. NLRC, supra, is misplaced. The legal basis of the ruling in that case is the
principle underlying Article 286 of the Labor Code which provides that the bona fide suspension of the operation of a
business or undertaking for a period not exceeding six (6) months shall not terminate employment. In contrast, the
instant case involves the preventive suspension of an employee not by reason of the suspension of the business
operations of the employer but because of the employee’s failure to attend a meeting. The allowable period of
suspension in such a case is only 30 days as provided by the Implementing Rules.

In sum, Maricalum Mining cannot feign denial of due process. Its theory is based entirely on its erroneous reading
of Valdez v. NLRC. The fact is that Decorion’s preventive suspension was unwarranted and unjustified and lasted
for more than the period allowed by law.

WHEREFORE, the instant petition is hereby DENIED. The challenged Decision and Resolution of the Court of
Appeals respectively dated May 29, 2002 and May 16, 2003 are hereby AFFIRMED. Costs against petitioner.

Labor II – 1
 39.) [G.R. NO. 154503 : February 29, 2008]

UNIWIDE SALES WAREHOUSE CLUB and VIVIAN M. APDUHAN, Petitioners, v. NATIONAL

LABOR RELATIONS COMMISSION and AMALIA P. KAWADA, Respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by
Uniwide Sales Warehouse Club (Uniwide) and Vivian M. Apduhan (Apduhan) seeking to annul the
Decision1 dated November 23, 2001 and the Resolution2 dated July 23, 2002 of the Court of Appeals
(CA) in CA-G.R. SP No. 64581.

The facts of the case:

Amalia P. Kawada (private respondent) started her employment with Uniwide sometime in 1981 as a
saleslady. Over the years, private respondent worked herself within Uniwide's corporate ladder until
she attained the rank of Full Assistant Store Manager with a monthly compensation of P13,000.00 in
1995.

As a Full Assistant Store Manager, private respondent's primary function was to manage and oversee
the operation of the Fashion and Personal Care, GSR Toys, and Home Furnishing Departments of
Uniwide, to ensure its continuous profitability as well as to see to it that the established company
policies and procedures were properly complied with and implemented in her departments.3

Sometime in 1998, Uniwide received reports from the other employees regarding some problems in
the departments managed by the private respondent.4 Thus, on March 15, 1998, Uniwide, through
Store Manager Apduhan, issued a Memorandum addressed to the private respondent summarizing
the various reported incidents signifying unsatisfactory performance on the latter's part which include
the commingling of good and damaged items, sale of a voluminous quantity of damaged toys and
ready-to-wear items at unreasonable prices, and failure to submit inventory reports. Uniwide asked
private respondent for concrete plans on how she can effectively perform her job.5 In a letter6 dated
March 23, 1998, private respondent answered all the allegations contained in the March 15, 1998
Memorandum.

Unsatisfied, Apduhan sent another Memorandum7 dated March 30, 1998 to private respondent where
Apduhan claimed that the answers given by the private respondent in her March 23, 1998 letter were
all hypothetical and did not answer directly the allegations attributed to her.8 Apduhan elaborated the
incidents contained in the March 15, 1998 Memorandum.

On June 30, 1998, Apduhan sent another Memorandum9 seeking from the private respondent an
explanation regarding the incidents reported by Uniwide employees and security personnel for
alleged irregularities committed by the private respondent such as allowing the entry of unauthorized
persons inside a restricted area during non-office hours, falsification of or inducing another employee
to falsify personnel or company records, sleeping and allowing a non-employee to sleep inside the
private office, unauthorized search and bringing out of company records, purchase of damaged home
furnishing items without the approval from superior, taking advantage of buying damaged items in
large quantity, alteration of approval slips for the purchase of damaged items and abandonment of
work.10 In a letter11 dated July 9, 1998, private respondent answered the allegations made against
her.

Labor II – 1
On July 27, 1998, private respondent sought medical help from the company physician, Dr. Marivelle
C. Zambrano (Dr. Zambrano), due to complaints of dizziness.12 Finding private respondent to be
suffering from hypertension, Dr. Zambrano advised her to take five days sick leave.13

On July 30, 1998, private respondent was able to obtain from Dr. Zambrano a certificate of fitness to
work,14 which she presented to Apduhan the following day.15 It turned out that Dr. Zambrano
inadvertently wrote "Menia," the surname of the company nurse, in the medical certificate instead of
private respondent's surname.16 Thereafter, private respondent claims that Apduhan shouted at her
and prevented her from resuming work because she was not the person referred to in the medical
certificate.17 After private respondent left Apduhan's office, a certain Evelyn Maigue, Apduhan's
assistant, approached the private respondent to get the certification so that it may be photocopied.
When she refused to give the certification, private respondent claims that Apduhan once again
shouted at her which caused her hypertension to recur and eventually caused her to collapse. Private
respondent's head hit the edge of the table before she fell down on the ground for which she suffered
contusions at the back of her head, as evidenced by the medical certificate18 issued by Dr. George K.
C. Cheu of the Chinese General Hospital & Medical Center.19

On August 1, 1998, private respondent reported the confrontation between her and Apduhan to the
Central Police District.20 Likewise, private respondent was able to obtain from Dr. Zambrano the
corrected certification21 together with the clarification that the name "Amalia Menia" written on the
July 30, 1998 certification referred to Amalia Kawada.22

Thereafter, counsel for private respondent sent a letter23 dated August 1, 1998 to Apduhan stating
that the latter's alleged continued harassment and vexation against private respondent created a
hostile work environment which had become life threatening, and that they had no alternative but to
bring the matter to the proper forum.24

On August 2, 1998, Apduhan issued a Memorandum,25 received on the same day by Edgardo

Kawada, the husband of private respondent, advising the latter of a hearing scheduled on August 12,
1998 to be held at the Uniwide Office in Quirino Highway, and warning her that failure to appear shall
constitute as waiver and the case shall be submitted for decision based on available papers and
evidence.26

On August 3, 1998, private respondent filed a case for illegal dismissal before the Labor Arbiter
(LA).27

Counsel for private respondent sent a letter28 dated August 8, 1998 to Apduhan claiming that the
August 2, 1998 Memorandum was a mere afterthought, in an attempt to justify private respondent's
dismissal; and that on August 3, 1998, private respondent had already filed charges against Uniwide
and Apduhan (petitioners).

On August 8, 1998, Apduhan sent a letter addressed to private respondent, which the latter received
on even date, advising private respondent to report for work, as she had been absent since August 1,
1998; and warning her that upon her failure to do so, she shall be considered to have abandoned her
job.29

On September 1, 1998, Apduhan issued a Memorandum30 stating that since private respondent was
unable to attend the scheduled August 12, 1998 hearing, the case was evaluated on the basis of the
evidence on record; and enumerating the pieces of evidence of the irregularities and violations of
company rules committed by private respondent, the latter's defenses and the corresponding findings
by Uniwide. Portions of the Memorandum read:

VIOLATIONS:

Labor II – 1
1. Allowing entry of Unauthorized person inside a Restricted Area during non-office hours (night-
time)

xxx

FINDINGS:

Towards these evidence, Ms. A. Kawada only raised questions as to the propriety of the entries on
the logbook, but the offense itself was not even denied categorically by the employee concerned.
Hence, the fact remains that the employee concerned indeed allowed the entries of Mr. Ed Kawada
on different occasions. The Security personnel when asked why they did not report those incidents
immediately, answered: They hesitated to report them because they were afraid as the employee
concerned is a manager, whom they thought knows better then them.

*Violation - No. 9 Type C, Code of Discipline*

2. Falsification of or Inducing another employee to falsify personnel or company records.

xxx

FINDINGS:

In her answer, Ms. A. Kawada again only questioned the propriety of the entries on the logbook, but
there were clear indications that the violation was indeed committed as shown by the abovestated
pieces of evidence.

The testimonies by the witnesses' are very explicit of what really transpired, specifically security
guard Dennis Venancio, who just performs his duty of reporting any unusual incident that occurred
within his jurisdiction. The fact that they failed to report it at an earlier time, in understandable, since
they were hesitant, that the manager might get back at them, or simply because of their respect for
Ms. A. Kawada, as a Manager.

*Violation - No. 8 Type F, Code of Discipline*

3. Sleeping during overnight work last August 17, 1997.

xxx

FINDINGS:

Based on the records and reports submitted, there is no doubt that the concerned employee
committed such an offense. The witnesses stated their testimonies only in accordance with what they
have seen and witnessed during those stated periods.

*Violation - No. 7 Type D, Code of Discipline*

4. Unauthorized Search, Bringing Out and taking of Company Records, March 18, 1998 and March
20, 1998.

xxx

FINDINGS:

Labor II – 1
It is established that 15 approval slips were taken by the employee concerned, however, only 11
approval slips were surrendered or returned.

*Violation - No. 1 Type F, Code of Discipline*

5. Purchases of Dented or Sub-standard items of Home Furnishing without approval from authorized
Supervisor, February 3, 1998.

xxx

FINDINGS:

Towards this accusation subject employee countered that she only asked Ms. Melanie Laag why she
was not able to sign said approval slip but not for the purpose of letting her sign it. By this, it only
means that indeed the said approval slip does not contain the necessary approval prior to the
purchase. This could be related to the other charge against the subject employee on unauthorized
search and bringing out of company records, for based on the circumstances there was such a search
conducted to look for and retrieve approval slips of subject employee, as there are really approval
slips of subject employee which does not bear the necessary approval. The search must have been
probably made to cover up and/or suppress such evidence against her.

6. Altering Approval slips dated January 17, 1998.

a) #1 original quantity - 7 pieces changed to 2 pieces - amount was altered from Php14.00 to
Php10.00.

b) #2 erasures on the number of quantity whether 15, 5 or 7 pieces.

xxx

FINDINGS:

Towards this accusation Ms. A. Kawada submitted no plausible explanation, indicating that said
employee concerned might have really committed the acts complained of.

Violation of Company Rules on the proper procedure in selling of dented merchandise.

7. Making Reservations of Dented Items - January to February 1998.

xxx

FINDINGS:

There was no direct explanation submitted by Ms. A. Kawada on this. Thus, it becomes clear that Ms.
Kawada had violated the company rule on No Reservation.

8. Conduct unbecoming of a manager in cornering and/or bringing large quantity of damaged items
(toys, furniture, RTW, appliances and Home Furnishing items), causing demoralization among the
store crew and tainting management's image to its personnel.

xxx

FINDINGS:
Labor II – 1
The report that were submitted by the witnesses proved that Ms. Kawada made those purchases of
dented or sub-standard items that were under her assigned area, without regard for the rest of the
employees who wanted to buy also, thus, using and taking advantage of her position, to the
detriment of the other employees and painting a bad image of the company's managers.

9. Abandonment of work or absence for five (5) consecutive days without prior notice from any
authorized company officer or higher authority.

FINDINGS:

Despite notice for subject employee to report to work or else be considered as having abandoned her
job, it appears that subject employee continuously failed to report for work without any explanation.

*Violation - No. 2, Sec. A*

Based on all the foregoing it seems clear and convincing, that you have indeed committed the
violations imputed on you. The aforementioned violations per se deserves termination as a penalty,
not to mention that they also constitute willful breach of the trust reposed on you as a
manager. Thus, we have no other alternative but to terminate your service with the
Company, effective September 1, 1998, on the grounds of violations of Company Rules,
Abandonment of Work and loss of trust and confidence.

You are hereby directed to surrender all other documents and papers pertaining to your job, which
you may have acquired and have come into your possession as a result of your employment with the
company.

Please be guided. thank you.31 (Emphasis supplied) cralawlibrary

On March 9, 1999 the LA32 dismissed the complaint for lack of merit.33 Private respondent appealed
the LA's decision to the National Labor Relations Commission (NLRC).

In its Decision34 dated December 27, 2000, the NLRC ruled in favor of private respondent, reversing
the LA, to wit:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE. Complainant is
declared constructively dismissed by respondents. Respondents Uniwide Sales Warehouse Club and
Vivian Apduhan are jointly and severally ordered to pay complainant the following sums:

Separation Pay:

November 1981 -July 3, 1998

P13,000.00 x 16.8 yrs. = P218,400.00

Backwages:

July 31, 1998-up to the present

Moral Damages : = P100,000.00

Exemplary Damages P100,000.00

Attorney's fees computed at ten percent (10%) of the total award.

Labor II – 1
SO ORDERED.35

According to the NLRC, private respondent was subjected to inhuman and anti-social treatment
oppressive to labor. Private respondent received successive memoranda from Apduhan accusing the
former of different infractions, some of which offenses complainant was informed of only a year after
the alleged commission. Further, Apduhan's ill will and motive to edge private respondent out of her
employ was displayed by Apduhan's stubborn refusal to allow private respondent to continue her
work on the flimsy excuse that the medical certificate did not bear her correct surname, while
Apduhan knew for a fact that the same could not have referred to another person but to private
respondent.36

Also, the NLRC observed that private respondent was not afforded due process by petitioners
because the former was not given an opportunity to a fair hearing in that the investigation was
conducted after private respondent had been constructively dismissed; and that there was no point
for private respondent to still attend the investigation set on August 12, 1998 after her constructive
dismissal on July 31, 1998 and after she had already filed her complaint.

Feeling aggrieved, petitioners appealed the NLRC Decision to the CA. In the assailed Decision37 dated
November 23, 2001, the CA affirmed in toto the NLRC Decision.

Hence, the present petition.38

The sole issue raised before the Court is:

WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN SUSTAINING THE NLRC'S
FINDING THAT PRIVATE RESPONDENT WAS CONSTRUCTIVELY DISMISSED.39

It is a well-settled rule that the jurisdiction of the Supreme Court in Petitions for Review
on Certiorari under Rule 45 of the Rules of Court is limited to reviewing errors of law, not of
fact.40 The Court is not a trier of facts. In the exercise of its power of review, the findings of fact of
the CA are conclusive and binding and consequently, it is not the Court's function to analyze or weigh
evidence all over again.41

The foregoing rule, however, is not absolute. The Court, in Dusit Hotel Nikko v. National Union of
Workers in Hotel, Restaurant and Allied Industries (NUWHRAIN), 42 held that the factual findings of
the NLRC as affirmed by the CA, are accorded high respect and finality unless the factual findings and
conclusions of the LA clash with those of the NLRC and the CA in which case the Court will have to
review the records and the arguments of the parties to resolve the factual issues and render
substantial justice to the parties.43

The present case is clouded by conflict of factual perceptions. Consequently, the Court is constrained
to review the factual findings of the CA which contravene the findings of facts of the LA.

The Court's Ruling

The petition is meritorious. After a thorough examination of the conflicting positions of the parties,
the Court finds the records bereft of evidence to substantiate the conclusions of the NLRC and the CA
that private respondent was constructively dismissed from employment.

Case law defines constructive dismissal as a cessation of work because continued employment
is rendered impossible, unreasonable or unlikely; when there is a demotion in rank or
diminution in pay or both; or when a clear discrimination, insensibility, or disdain by an
employer becomes unbearable to the employee.44

Labor II – 1
The test of constructive dismissal is whether a reasonable person in the employee's
position would have felt compelled to give up his position under the circumstances.45 It is
an act amounting to dismissal but made to appear as if it were not. In fact, the employee
who is constructively dismissed may be allowed to keep on coming to work. Constructive
dismissal is therefore a dismissal in disguise. The law recognizes and resolves this situation in
favor of employees in order to protect their rights and interests from the coercive acts of the
employer.46

In the present case, private respondent claims that from the months of February to June 1998, she
had been subjected to constant harassment, ridicule and inhumane treatment by Apduhan, with the
hope that the latter can get the private respondent to resign.47 The harassment allegedly came in the
form of successive memoranda which private respondent would receive almost every week,
enumerating a litany of offenses and maligning her reputation and spreading rumors among the
employees that private respondent shall be dismissed soon.48 The last straw of the imputed
harassment was the July 31, 1998 incident wherein private respondent's life was put in danger when
she lost consciousness due to hypertension as a result of Apduhan's alleged hostility and shouting.49

The Court finds that private respondent's allegation of harassment is a specious statement which
contains nothing but empty imputation of a fact that could hardly be given any evidentiary weight by
this Court.50 Private respondent's bare allegations of constructive dismissal, when uncorroborated by
the evidence on record, cannot be given credence.51

The sending of several memoranda addressed to a managerial or supervisory employee concerning

various violations of company rules and regulations, committed on different occasions, are not
unusual. The alleged February to June 1998 series of memoranda given by petitioners to private
respondent asking the latter to explain the alleged irregular acts should not be construed as a form
of harassment but merely an exercise of management's prerogative to discipline its employees.

The right to impose disciplinary sanctions upon an employee for just and valid cause, as well as the
authority to determine the existence of said cause in accordance with the norms of due process,
pertains in the first place to the employer.52 Precisely, petitioners gave private respondent successive
memoranda so as to give the latter an opportunity to controvert the charges against her. Clearly, the
memoranda are not forms of harassment, but petitioners' compliance with the requirements of due
process.

The July 31, 1998 confrontation where Apduhan allegedly shouted at private respondent which
caused the latter's hypertension to recur and eventually caused her to collapse cannot by itself
support a finding of constructive dismissal by the NLRC and the CA. Even if true, the act of Apduhan
in shouting at private respondent was an isolated outburst on the part of Apduhan that did not show
a clear discrimination or insensibility that would render the working condition of private respondent
unbearable.

Moreover, the finding of the NLRC that Apduhan knew for a fact that the certification presented by
private respondent referred to the latter and not to another person is a mere conjecture. There is no
evidence to sustain the same. This Court has consistently held that litigations cannot be properly
resolved by suppositions, deductions, or even presumptions, with no basis in evidence, for the truth
must have to be determined by the hard rules of admissibility and proof.53

Self-serving and unsubstantiated declarations are insufficient to establish a case before quasi-judicial
bodies. Well-entrenched is the rule that the quantum of evidence required to establish a fact in
quasi-judicial bodies is substantial evidence. Substantial evidence is such amount of relevant
evidence which a reasonable mind might accept as adequate to support a conclusion, even if other
equally reasonable minds might opine otherwise.54

Labor II – 1
On petitioners' claim of abandonment by private respondent, well-settled is the rule that to constitute
abandonment of work, two elements must concur: (1) the employee must have failed to
report for work or must have been absent without valid or justifiable reason, and (2) there
must have been a clear intention on the part of the employee to sever the employer-
employee relationship manifested by some overt act. The employer has the burden of proof to
show the employee's deliberate and unjustified refusal to resume his employment without any
intention of returning. Mere absence is not sufficient. There must be an unequivocal intent on the
part of the employee to discontinue his employment.55

Private respondent's failure to report for work despite the August 8, 1998 letter sent by Apduhan to
private respondent advising the latter to report for work is not sufficient to constitute abandonment.
It is a settled rule that failure to report for work after a notice to return to work has been served
does not necessarily constitute abandonment.56

Private respondent mistakenly believed that the successive memoranda sent to her from March 1998
to June 1998 constituted discrimination, insensibility or disdain which was tantamount to constructive
dismissal. Thus, private respondent filed a case for constructive dismissal against petitioners and
consequently stopped reporting for work.

In the case of Lemery Savings & Loan Bank v. National Labor Relations Commission, 57 the Court
held:

It is true that the Constitution has placed a high regard for the welfare of the labor sector. However,
social and compassionate justice does not contemplate a situation whereby the management stands
to suffer for certain misconceptions created in the mind of an employee. x x x

Nevertheless, the mistaken belief on the part of the employee should not lead to a drastic
conclusion that he has chosen to abandon his work. x x x We cannot readily infer abandonment
even if, sometime during the pendency of this case, he refused to heed the warning given him by
petitioner Dimailig while believing that he was dismissed through no fault of his.58 (Emphasis
supplied) cralawlibrary

The Court finds that petitioners were not able to establish that private respondent deliberately
refused to continue her employment without justifiable reason. To repeat, the Court will not make a
drastic conclusion that private respondent chose to abandon her work on the basis of her mistaken
belief that she had been constructively dismissed by Uniwide.

Nonetheless, the Court agrees with the findings of the LA that the termination of private respondent
was grounded on the existence of just cause under Article 282 (c) of the Labor Code59 or willful
breach by the employee of the trust reposed on him by his employer or a duly authorized
representative.60

Private respondent occupies a managerial position. As 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.61

In Caoile v. National Labor Relations Commission, 62 the Court distinguished the treatment of
managerial employees from that of rank-and-file personnel, insofar as the application of the loss of
trust and confidence is concerned. The Court held:

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.63 But, as regards
a managerial employee, mere existence of a basis for believing that such employee has
Labor II – 1
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 participation therein renders him unworthy of trust and
confidence demanded by his position.64 (Emphasis supplied).

In order to give private respondent an opportunity to explain the several violations of company rules
she allegedly committed, private respondent was given several memoranda, to which she initially
responded. Also, to give private respondent an opportunity to be heard, defend herself, confront the
witnesses against her as well as to present her own evidence, Apduhan scheduled a hearing on
August 12, 1998, notice of which was sent on August 2, 1998 and duly received by private
respondent's husband on the same day.65 This fact alone would have indicated to private respondent
that there was no intention on the part of petitioners to effect her constructive dismissal. However,
private respondent opted to file the complaint for illegal dismissal the next day; and not to attend the
scheduled hearing on August 12, 1998. Thus, petitioners were justified to decide the case on the
basis of the records at hand.66

The irregularities and offenses committed by private respondent, corroborated by the various pieces
of evidence supporting such charges, i.e. records, reports and testimonies of Uniwide employees,67 in
the mind of the Court, constitute substantial evidence that private respondent is in fact responsible
for the alleged charges.

To disprove the charges against her, private respondent presented a letter68 dated July 29, 1998
from a former Uniwide employee, Luisa Astrologo (Astrologo), stating that the latter was urged by
her manager, a certain Ralph Galang, to testify against private respondent for improper behavior
concerning the "dented product for which private respondent is abusing her power of reserving and
picking the best product she can afford to dispatch."69 The letter, however, does not state that the
charges Astrologo imputed to private respondent were false. The letter merely states that Astrologo
"does not see anything wrong about the matter."70 Moreover, in her Memorandum,71 filed with the
Court, private respondent merely cited inconsistencies in the reports regarding the charges imputed
to her without denying the said allegations.

It is true that private respondent had risen from the ranks, from being a saleslady in 1981 to a Full
Assistant Store Manager in 1995. She worked for Uniwide for almost 17 years with a clean bill of
record. However, these facts are not sufficient to overcome the findings of petitioners that the
private respondent is guilty of the charges imputed to her.

Finally, the NLRC and the CA erred in finding that private respondent was denied due process. Private
respondent claims that she lost the opportunity to be heard when she was constructively dismissed
on July 31, 1998,72 and that it was only after she filed a complaint for illegal dismissal with the NLRC
on August 3, 1998 that petitioners notified the private respondent of the investigation which will be
conducted on August 12, 1998 concerning her alleged offenses. The Memorandum dated August 2,
199873 completely demolishes such claims. It shows on its face that private respondent received the
Memorandum on August 2, 1998, a day before she filed the complaint for illegal dismissal against
petitioners; and that private respondent was notified that the hearing was scheduled on August 12,
1998 and explicitly warned her that her failure to appear thereat shall mean a waiver to be heard,
and the case shall then be submitted for decision based on available papers and evidence.

In reality, private respondent, as found earlier was not terminated on July 31, 1998. There was no
constructive dismissal. Again, the successive memoranda presented by private respondent and the
alleged July 31, 1998 shouting incident are not sufficient to establish her claim of harassment.

Labor II – 1
However, as to the September 1, 1998 Memorandum where the private complainant was dismissed
for loss of trust and confidence, the Court finds the notice of the scheduled August 12, 1998 hearing
sufficient compliance with the due process requirement.

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

proceedings, a fair and reasonable opportunity to explain one's side.74 It is not the denial of the right
to be heard but denial of the opportunity to be heard that constitutes violation of due process of
law.75 In the instant case, private respondent was again notified of the August 12, 1998 hearing
through a letter76 dated August 8, 1998 which was received by private respondent herself.77 Clearly,
private respondent was given an opportunity to be heard. However, private respondent chose not to
attend the scheduled hearing because of her mistaken belief that she had already been constructively
dismissed.

At this point, the Court agrees with and adopts the findings of the LA in his Decision:78

We cannot, with due respect, subscribe to complainant's [herein private respondent] position for it
simply lacks evidence and that all that there is to it is seemingly a general allegation. We examined
the record and as we have done it we find no acts or incidents constituting complainant's alleged
"constructive dismissal". On the contrary, what is generally existing thereat is that complainant was
dismissed by the respondents [Uniwide and Apduhan] for an array of violations consisting of, but not
limited to the following: allowing entry of unauthorized personnel inside a company restricted area;
falsification of or inducing another employee to falsify personnel or company records; sleeping during
overnight work; unauthorized search and bringing out of company records; unauthorized purchase of
damaged items; alteration of approval slips for the purchase of damaged items; unduly reserving and
buying of damaged items; and abandonment of work.

In fact, as it even appears the "constructive dismissal" allegedly committed on

complainant looks simply an excuse to avoid and/or evade the investigation and
consequences of the violations imputed against her while employed and/or acting as
respondent's assistant store manager. As shown on an earlier setting on the investigation of her
case, she filed a sick leave, thus causing the hearing/investigation to be rescheduled. Again, upon
rescheduling, complainant despite notice failed to appear or did not appear, this time coming up with
the excuse that she had been already "constructively dismissed". This evasive attitude of her more
than enough supports the impression that complainant could be guilty or is guilty of the charges
against her and believes that she might not be able to defend herself. This is even bolstered by the
information that complainant called on several of the witnesses against her, simply to influence them
and their testimonies. x x x Thus, viewed the foregoing finding, we opined that complainant could not
have been "constructively dismissed."79 (Emphasis supplied) cralawlibrary

It should be remembered that the Philippine Constitution, while inexorably committed towards the
protection of the working class from exploitation and unfair treatment, nevertheless mandates the
policy of social justice so as to strike a balance between an avowed predilection for labor, on the one
hand, and the maintenance of legal rights of capital, the proverbial hen that lays the golden egg, on
the other. Indeed, we should not be unmindful of the legal norm that justice is in every case for the
deserving, to be dispensed with in light of established facts, the applicable law, and existing
jurisprudence.80

WHEREFORE, the instant petition is GRANTED. The Decision dated November 23, 2001 and
Resolution dated July 23, 2002 of the Court of Appeals in CA-G.R. SP No. 64581 together with the
Decision dated December 27, 2000 of the National Labor Relations Commission are REVERSED and
SET ASIDE. The complaint of private respondent Amalia P. Kawada is DISMISSED.

Labor II – 1
40.) G.R. No. 159730             February 11, 2008

NORKIS TRADING CO., INC. and/or MANUEL GASPAR E. ALBOS, JR., petitioner,

vs.
MELVIN GNILO, respondent.**

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to annul and set aside
the Decision1 dated June 20, 2003 and the Resolution2 dated August 25, 2003 of the Court of Appeals (CA) in CA
G.R. SP No. 72568.

Melvin R. Gnilo (respondent) was initially hired by Norkis Trading Co., Inc. (petitioner Norkis) as Norkis Installment
Collector (NIC) in April 1988. Manuel Gaspar E. Albos, Jr. (petitioner Albos) is the Senior Vice-President of
petitioner Norkis. Respondent held various positions in the company until he was appointed as Credit and Collection
Manager of Magna Financial Services Group, Inc.-Legaspi Branch, petitioner Norkis’s sister company, in charge of
the areas of Albay and Catanduanes with travel and transportation allowances and a service car.

A special audit team was conducted in respondent's office in Legaspi, Albay from March 13 to April 5, 2000 when it
was found out that respondent forwarded the monthly collection reports of the NICs under his supervision without
checking the veracity of the same. It appeared that the monthly collection highlights for the months of April to
September 1999 submitted by respondent to the top management were all overstated particularly the account
handled by NIC Dennis Cadag, who made it appear that the collection efficiency was higher than it actually was;
and that the top management was misled into believing that respondent’s area of responsibility obtained a favorable
collection efficiency.

Respondent was then charged by petitioners' Inquiry Assistance Panel (Panel) with negligence of basic duties and
responsibilities resulting in loss of trust and confidence and laxity in directing and supervising his own subordinates.
During the investigation, respondent admitted that he was negligent for failing to regularly check the report of each
NIC under his supervision; that he only checked at random the NIC's monthly collection highlight reports; and that
as a leader, he is responsible for the actions of his subordinates. He however denied being lax in supervising his
subordinates, as he imposed discipline on them if the need arose.

On May 30, 2000, petitioner Norkis through its Human Resource Manager issued a memorandum3 placing
respondent under 15 days suspension without pay, travel and transportation allowance, effective upon receipt
thereof. Respondent filed a letter protesting his suspension and seeking a review of the penalty imposed.

Another memorandum4 dated June 30, 2000 was issued to respondent requiring him to report on July 5, 2000 to the
head office of petitioner Norkis in Mandaluyong City for a re-training or a possible new assignment without prejudice
to his request for a reconsideration or an appeal of his suspension. He was then assigned to the Marketing Division
directly reporting to petitioner Albos.

In a letter5 dated July 27, 2000, respondent requested petitioner Albos that he be assigned as Sales Engineer or to
any position commensurate with his qualifications. However, on July 28, 2000, respondent was formally appointed
as Marketing Assistant to petitioner Albos, which position respondent subsequently assumed.

However, on October 4, 2000, respondent filed with the Labor Arbiter (LA) a complaint for illegal suspension,
constructive dismissal, non-payment of allowance, vacation/sick leave, damages and attorney's fees against
petitioners.

On March 30, 2001, the LA rendered his decision6 dismissing the complaint for lack of merit.

Labor II – 1
The LA found that the position of Credit and Collection Manager held by respondent involved a high degree of
responsibility requiring trust and confidence; that his failure to observe the required procedure in the preparation of
reports, which resulted in the overstated collection reports continuously for more than six months, was sufficient to
breach the trust and confidence of petitioners and was a valid ground for termination; that instead of terminating
him, petitioners merely imposed a 15-day suspension which was not illegal; and that petitioners exercised their
inherent prerogative as an employer when they appointed respondent as a Marketing Assistant.

Respondent appealed the LA decision to the National Labor Relations Commission (NLRC). In a Resolution7 dated
January 29, 2002, the NLRC reversed the LA, the dispositive portion of which reads:

WHEREFORE, premises considered, complainant's appeal is partly GRANTED. The Labor Arbiter's
decision in the above-entitled case is REVERSED. It is hereby declared that complainant was constructively
dismissed from his employment. Respondent Norkis Trading Co., Inc is ordered to pay complainant the
amount of P411,796.00 as backwages and separation pay, plus ten percent (10%) thereof as attorney's
fees.8

In so ruling, the NLRC found that the 15-day suspension cannot be considered harsh and unconscionable as
petitioners validly exercised their management prerogative to impose discipline on an erring employee for
negligence by submitting unreliable and inaccurate reports for six consecutive months to the top management who
used the reports in their planning and decision-making activities, and thus caused damage or injury one way or
another to petitioners. It however held that the transfer of respondent from the position of Credit and Collection
Manager to Marketing Assistant resulted in his demotion in rank from Manager to a mere rank and file employee,
which was tantamount to constructive dismissal and therefore illegal.

The NLRC ruled that respondent was constructively dismissed and therefore he was entitled to reinstatement and
payment of full backwages from the time he quit working on October 19, 2000 due to his demotion up to the time of
his actual reinstatement. However, it found that the parties' relationship was already strained on account of this
case; thus, it ordered the payment of respondent’s separation pay equivalent to his one-month salary for every year
of service. It upheld the LA's dismissal of respondent's prayer for damages for failure to submit substantial evidence
to support the same, but awarded attorney's fees.

Petitioners filed their Motion for Reconsideration while respondent filed his Motion for Reconsideration/Clarification.

On June 24, 2002, the NLRC issued another Resolution,9 the dispositive portion of which reads:

WHEREFORE, premises considered, respondents' [petitioners] motion for reconsideration is DENIED for
lack of merit while complainant's [respondent] motion for reconsideration is GRANTED. This Commission's
January 29, 2002 Resolution in the above-entitled case is hereby AFFIRMED with the MODIFICATION that
respondent Norkis Trading Company, Inc. is ordered to pay complainant the adjusted amount
of P444,739.38 as backwages, separation pay, 13th month pay and refund of provident fund contribution.10

In granting respondent's motion for reconsideration, the NLRC found that petitioners admitted in their Rejoinder that
they had not paid respondent his 13th-month pay and that respondent had yet to make a written request for the
refund of his provident fund contribution; thus, respondent was entitled thereto and the provident fund contribution
must also be returned to him.

Petitioners filed a petition for certiorari with the CA. Subsequently, they also filed a Motion for the Issuance of a
Temporary Restraining Order or a Writ of Preliminary Injunction, as respondent had filed a Motion for the Issuance
of a Writ of Execution with the NLRC.

On June 20, 2003, the CA rendered its assailed Decision denying the petition and affirming the NLRC Resolutions.

On August 25, 2003, the CA denied petitioners’ Motion for Reconsideration.

Hence, herein petition wherein petitioners assigned the following errors committed by the CA:

Labor II – 1
 THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE ERRONEOUS
FINDINGS OF THE NLRC DESPITE THE FACT THAT THE NLRC OVERLOOKED, MISAPPRECIATED
OR MISAPPLIED SOME FACTS THAT WOULD HAVE AFFECTED THE RESULT OF THE CASE.

THE HONORABLE COURT OF APPEALS ACTED CONTRARY TO LAW AND JURISPRUDENCE WHEN
IT HELD THAT PRIVATE RESPONDENT WAS CONSTRUCTIVELY DISMISSED. 11

Petitioners contend that factual findings of quasi-judicial agencies, while generally accorded finality, may be
reviewed by this Court when the findings of the NLRC and the LA are contradictory; that in the exercise of its equity
jurisdiction, this Court may look into the records of the case to re-examine the questioned findings.

Petitioners claim that they were merely exercising their inherent prerogative as an employer when they appointed
respondent as Marketing Assistant to the Senior Vice-President for Marketing; that respondent's performance
evaluations during the previous years showed that he was weak in the financial aspect of operation, but was good in
marketing; thus, he would function with utmost efficiency and maximum benefit to the company in the Marketing
Department; and that he had accepted his appointment unconditionally.

Petitioners submit that the positions of Credit and Collection Manager and Marketing Assistant are co-equal
and of the same level of authority; that the scope of work of a Marketing Assistant is wider, since he has access
to confidential informations and has the chance to communicate directly with higher officers of the company; that his
area of responsibility as Credit and Collection Manager was limited to branches located in Legaspi City and Virac,
Catanduanes; whereas as Marketing Assistant, he is responsible for analyzing and coordinating all marketing
information relevant to the company's motorcycles from all over Luzon, and his reports are necessary for the
planning and decision-making activities of petitioners' top management; and that there is no demotion, since
respondent's position is more encompassing and vital to the company and he is receiving the same salary.

Petitioners also contend that they should not be adjudged to pay attorney's fees as they did not act in bad faith.

In his Comment, respondent states that it is not the function of this Court to analyze and weigh all over again the
evidence already considered in the proceedings below, as its jurisdiction is limited to reviewing errors of law; that the
CA had not only passed upon the legal/factual issues and arguments presented by the parties but had waded into
the records and found out that the findings of the NLRC were supported by substantial evidence. He informs this
Court that he was able to enforce the writ of execution issued by the NLRC and subsequently secured the release of
the monetary award on November 14, 2003.

The parties thereafter filed their respective memoranda.

The issue for resolution is whether respondent's transfer from the position of Credit and Collection Manager
to that of a Marketing Assistant amounts to a constructive dismissal. This is a factual matter. Rule 45 of the
Rules of Court provides that only questions of law may be raised in a petition for review on certiorari. The raison
d'etre is that the Court is not a trier of facts. It is not to re-examine and re-evaluate the evidence on record. The
general rule is that the factual findings of the NLRC, as affirmed by the CA, are accorded high respect and finality
unless the factual findings and conclusions of the LA clash with those of the NLRC and the CA, as it appears in this
case. Thus we have to review the records and the arguments of the parties to resolve the factual issues and render
substantial justice to the parties.12

Well-settled is the rule that it is the prerogative of the employer to transfer and reassign employees for valid reasons
and according to the requirement of its business.13 An owner of a business enterprise is given considerable leeway
in managing his business. Our law recognizes certain rights, collectively called management prerogative as inherent
in the management of business enterprises. We have consistently recognized and upheld the prerogative of
management to transfer an employee from one office to another within the business establishment, provided that
there is no demotion in rank or diminution of his salary, benefits and other privileges14 and the action is not motivated
by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause.15 This
privilege is inherent in the right of employers to control and manage their enterprises effectively.16

Labor II – 1
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.17

The employer bears the burden of showing that the transfer is not unreasonable, inconvenient or prejudicial to the
employee; and does not involve a demotion in rank or a diminution of his salaries, privileges and other
benefits.18 Should the employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to
constructive dismissal.19

Constructive dismissal is defined as a quitting because continued employment is rendered impossible,

unreasonable or unlikely; when there is a demotion in rank or a diminution of pay.20 Likewise, constructive dismissal
exists when an act of clear discrimination, insensibility or disdain by an employer becomes unbearable to the
employee, leaving him with no option but to forego his continued employment.21

A transfer is defined as a "movement from one position to another which is of equivalent rank, level or salary,
without break in service."22 Promotion, on the other hand, is the "advancement from one position to another with an
increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in
salary."23 Conversely, demotion involves a situation in which an employee is relegated to a subordinate or less
important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and
responsibilities, and usually accompanied by a decrease in salary.24

In this case, while the transfer of respondent from Credit and Collection Manager to Marketing Assistant did
not result in the reduction of his salary, there was a reduction in his duties and responsibilities which
amounted to a demotion tantamount to a constructive dismissal as correctly held by the NLRC and the CA.

A comparison in the nature of work of these two positions shows a great difference. As Credit and Collection
Manager, respondent was clothed with all the duties and responsibilities of a managerial employee. He could devise
and implement action plans to meet his objectives and exercise independent judgment in resolving problem
accounts. He had power and control over NICs, Branch Control Officers (BCOs) and Cashiers under his
supervision, and he provided them training in the performance of their respective works. Further, he had the
authority to ensure reserves in the NICs, BCOs and Cashiers in case of expansion, reassignment and/or
termination. There is no doubt that said position of Credit and Collection Manager entails great duties and
responsibilities and involves discretionary powers. In fact, even in petitioners’ pleadings, they repeatedly stated that
the position involved a high degree of responsibility requiring trust and confidence as it relates closely to the
financial interest of the company.

On the other hand, the work of a Marketing Assistant is clerical in nature, which does not involve the exercise of any
discretion. Such job entails mere data gathering on vital marketing informations relevant to petitioners' motorcycles
and making reports to his direct supervisor. He is a mere staff member in the office of the Senior Vice-President for
Marketing. While petitioners claim that the position of a Marketing Assistant covers a wide area as compared with
the position of Credit and Collection Manager, the latter is reposed with managerial duties in overseeing petitioners’
business in his assigned area, unlike the former in which he merely collates raw data. These two positions are not of
the same level of authority.

There is constructive dismissal when an employee's functions, which were originally supervisory in nature,
were reduced; and such reduction is not grounded on valid grounds such as genuine business necessity. 25

We quote with approval the findings of the CA on the matter of respondent's demotion in his functions, thus:

x x x Studying minutely the proof proffered by both sides, our considered ruling is that there is more than the
requisite quantum of evidence in support of the NLRC's conclusion that indeed, private respondent was
constructively dismissed. This is evident, not only from the much reduced powers and prerogatives of the
private respondent when his position was changed from Credit and Collection Manager to Marketing
Assistant to the Senior Vice President; the variance in the duties between the two, as may be gleaned from
the definition of functions made of record, in this case, are glaring and indubitable. As Credit and Collection
Manager, private respondent had the authority to "devise and implement action plans x x x, manage and
Labor II – 1
 control the security and safety of collections and repossessed units x x x, effectively supervise, teach and
train BCO and cashiers x x x, discipline NIC's, BCO's and cashiers, x x x," among others. In other words, he
was part of management, or was at the supervisory level, to say the least. On the other hand, as Marketing
Assistant to the Senior Vice President, private respondent was stripped of all management and oversize
wherewithal, and became an appendage of his immediate supervisor, confined to such mundane functions
as to "analyze monthly LTO data x x x, coordinate with Sales Engineers x x x, and make quarterly reports x
x x," give inputs on such dreary information such as prices of rice and copra, tobacco and gasoline, sources
of people's income, peace and order situation, prepare brochures, etc., which are humdrum clerical tasks
requiring little or no discretion. Worse, he lost all the people under him, and had no staff, and was relegated
to a "mere rank and file employee who had no one under his supervision and whose duties were merely
routinary and clerical in nature which did not require the use of independent judgment."26

Moreover, petitioners failed to refute respondent’s claim that as Credit and Collection Manager, he was provided
with a service car which was no longer available to him as Marketing Assistant; thus, such was a reduction in his
benefit.

There is also constructive dismissal when an act of clear discrimination, insensibility, or disdain by an employer
becomes so unbearable on the part of the employee as to foreclose any choice on his part except to resign from
such employment.27 As aptly observed by the CA, to wit:

While we may allow petitioners the leeway of disciplining its employees, which is why we uphold the finding
of the NLRC that the fifteen-day suspension of private respondent was legal and proper, We cannot
countenance the barbaric treatment suffered by the latter in the hands of his bosses. Undisputed it is that
not only was private respondent made to look like an idiot when he was not given work in his new
assignment, but that he was humiliated and debased when petitioner Albos, in a very uncouth manner,
hurled expletives at the private respondent, calling him bobo, gago and screaming putang ina mo in front of
him, at the same time "crumpling (his) report" and throwing it into his face. Such undignified and boorish
deeds perpetrated against private respondent directly caused him to forthwith leave the employ of petitioner
corporation, which he served loyally for some twelve (12) years. 28

Respondent’s demotion in the nature of his functions coupled with petitioner Albos’s act of insensibility no doubt
amounts to his constructive dismissal.

Anent petitioners' claim that respondent unconditionally accepted his formal appointment as Marketing Assistant on
August 3, 2000, we note that in a letter dated July 27, 2000 addressed to petitioner Albos when he learned that he
would be assigned as a Marketing Assistant, respondent had expressed reservations on such assignment and
asked that he instead be assigned as Sales Engineer or to any position commensurate to his qualifications.
Respondent could not be faulted for accepting the position of a Marketing Assistant, since he did so and stayed put
in order to compare and evaluate his position. However, he experienced not only a demotion in his duties and
responsibilities, an undignified treatment by his immediate superior, which prompted him to file this case.

Petitioners argue that it is patently inimical to their interest if respondent would be maintained in the position of
Credit and Collection Manager, as he was negligent in the performance of his duties as such; that the 1999 incident
was not the first time that respondent forwarded to top management overstated collection reports, since three of the
NICs under respondent's supervision committed similar misrepresentations in 1997; and that it has been held that
the mere existence of a basis for believing that the supervisor or other personnel occupying positions of
responsibility has breached the trust and confidence reposed in him by his employer is a sufficient ground for
dismissal.

While petitioners have the prerogative to transfer respondent to another position, such transfer should be done
without diminution of rank and benefits which has been shown to be present in respondent's case. He could have
been transferred to a job of managerial position and not to that of a Marketing Assistant. Moreover, petitioners failed
to substantiate their claim that respondent was weak in the financial aspect of operation, but he was good in
marketing, as the performance evaluation report relied upon by petitioners would not suffice. On the other hand, the
evaluation report dated March 10, 1997 stated that respondent's track records in sales and collection showed his
potential for advancement and could be the basis for his promotion to Marketing Manager.

Labor II – 1
We note that the alleged overstated collection reports of three NICs under respondent's supervision submitted in
1997, were already mentioned in the IAP report of the 1999 incident for which respondent was meted the penalty of
15- day suspension without salary, travel and transportation allowance; thus, the same could no longer be used to
justify his transfer. Moreover, respondent's demotion, which was a punitive action, was, in effect, a second penalty
for the same negligent act of respondent.

Finally, we find no error committed by the NLRC in awarding attorney's fees. In San Miguel Corporation v.
Aballa,29 we held that in actions for recovery of wages or where an employee was forced to litigate and thus incur
expenses to protect his rights and interests, a maximum of 10% of the total monetary award by way of attorney's
fees is justifiable under Article 111 of the Labor Code,30 Section 8, Rule VIII, Book III of its Implementing Rules;31 and
paragraph 7, Article 2208 of the Civil Code.32 The award of attorney's fees is proper and there need not be any
showing that the employer acted maliciously or in bad faith when it withheld the wages. There need only be a
showing that the lawful wages were not paid accordingly.33

WHEREFORE, the petition is DENIED. The Decision dated June 20, 2003 and the Resolution dated August 25,
2003 of the Court of Appeals are AFFIRMED.

Labor II – 1
 41.) [G.R. NO. 152531 : July 27, 2007]

RODELIA S. FUNGO, Petitioner, v. LOURDES SCHOOL OF MANDALUYONG and FR.

SERVILLANO B. BUSTAMANTE, OFM, CAP., Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Challenged in this Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, are the Decision1 dated July 25, 2001 and Resolution dated January 18,
2002 of the Court of Appeals in CA-G.R. SP No. 59424.

Rodelia S. Fungo, petitioner, alleged in her petition that on June 1, 1981, she was employed as
secretary of respondent Fr. Servillano B. Bustamante, rector of Lourdes School of Mandaluyong.
Respondent Fr. Bustamante authorized her to file and keep confidential documents in his office. He
entrusted to her the duplicate keys of the filing cabinet and she was allowed to take any document
therefrom whenever she had to bring some matters to his attention.

In January 1996, petitioner's husband, Nicolas Fungo, an elementary school teacher in the same
school, was dismissed from the service because of his low performance rating. According to
petitioner, her husband's services were terminated because of his statement during a faculty meeting
that the Mission and Vision Statement of the school is not being practiced. He was also one of those
who signed a letter asking the Provincial Minister of the Capuchins in the Philippines to appoint Fr.
Miguel Peralta either as rector or vice rector of the school. Fr. Peralta is "a close rival" of respondent
Fr. Bustamante since their seminary days.

Petitioner then wrote respondent Fr. Bustamante questioning the performance rating given to her
husband. She attached to her letter documents containing the summary of efficiency ratings of all the
teachers. She retrieved these documents from the filing cabinet.

On March 8, 1996 petitioner received a letter from respondent Fr. Bustamante requiring her to
explain in writing why she should not be dismissed from employment for willful breach of trust
reposed on her.

On March 11, 1996, petitioner filed her written explanation.

Petitioner further alleged in her petition that in the morning of April 1, 1996, Fr. Manuel Remirez, the
school treasurer, summoned her to his office. Thereupon, he compelled her to tender her resignation
within 30 minutes, otherwise, she will not receive her separation pay. Petitioner pleaded for one day
deferment so she could consult her aunt, Milagros Tadeo, former assistant principal on academics for
the elementary department of the same school. However, Fr. Remirez denied her plea. Considering
that her husband was jobless and that her family was in financial predicament, petitioner submitted
her resignation letter2 on the very same day. Subsequently, she received her separation pay.

On January 28, 1997, petitioner filed with the Labor Arbiter a complaint for illegal dismissal with
prayer for reinstatement and payment of backwages and other benefits, as well as for an award of
moral and exemplary damages and attorney's fees. Petitioner alleged therein that she was forced to
resign and to accept her separation pay; and that Fr. Remirez took advantage of her economic plight,
compelling her to submit her resignation letter within 30 minutes.

Respondents, in their answer, denied the allegations in the complaint, contending that petitioner
voluntarily submitted her resignation letter on April 1, 1996. She even filed with the school an
Labor II – 1
application for benefits under the Retirement Plan of the Catholic Educational Association of the
Philippines (CEAP) which was granted. Then she executed a waiver of her claims for benefits from the
school and the CEAP board of trustees. Respondents thus prayed that the complaint be dismissed for
being malicious and baseless.

On September 23, 1998, the Labor Arbiter promulgated a Decision3 finding that petitioner was
constructively dismissed from employment. The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby entered in favor of complainant and against
respondents, ordering the latter, jointly and severally, as follows:

1. To pay the sum of P316,187.00 as backwages of complainant from April 1, 1996 up to September
1, 1998, less P58,292.60 which was paid to her in advance;

2. To pay another sum of P21,806.00 as mandatory 13th month pay of the complainant for two
years, 1996 and 1997; and cralawlibrary

3. To immediately reinstate complainant to her former or equivalent position under the same terms
and conditions prevailing prior to her dismissal or separation, or, at the option of the employer, to
reinstate her name in the payroll, also under the same terms and conditions prevailing prior to her
dismissal or separation. Provided; however, that should reinstatement be no longer feasible due to
any intervening event, respondents are further ordered to pay the separation pay of complainant
equivalent to her one (1) month salary per year of service, a fraction of six (6) months considered as
one (1) year without qualification or deduction in addition to her backwages. All other issues or
claims are hereby ordered DISMISSED for lack of merit.

SO ORDERED.4

On appeal, the National Labor Relations Commission (NLRC), in its Decision dated November 22,
1999, reversed the Labor Arbiter's judgment, holding that based on the documentary evidence
presented by respondents, petitioner voluntarily resigned. Her resignation letter and application for
benefits under the CEAP Retirement Plan negate her claim that she was illegally dismissed.

Petitioner filed a motion for reconsideration but the NLRC denied the same in its Resolution5 dated
April 17, 2000.

Petitioner seasonably filed with the Court of Appeals a Petition for Certiorariunder Rule 65 of the
1997 Rules of Civil Procedure, as amended, contending that the NLRC committed grave abuse of
discretion in ruling that she resigned voluntarily. On July 25, 2001, the appellate court rendered its
Decision dismissing the petition. Its ratiocination is partly reproduced as follows:

A painstaking examination of the records leads this Court to conclude that petitioner cannot that
easily be intimidated into tendering her resignation for a simple reason that she was facing a financial
trauma out of the dismissal of her husband. If she was of honest heart and belief that she has every
right to hold and maintain her position and employment as secretary, she could have fought off the
imposing threats she alleges to have been given by Fr. Remirez and simply turned down the latter's
offer. In fact, she would even have a better standing in court if she was terminated by her employers
rather than executing a resignation letter and later on claim that such was only resorted to because
of undue intimidation of her superior. Indubitably, it is the petitioner's word now against the word of
Fr. Remirez that she was pressured into resigning by the latter.

Petitioner filed a motion for reconsideration. However, it was denied by the appellate court in its
Resolution dated January 18, 2002.

Labor II – 1
Hence, this petition.

The primordial issue for our resolution is whether the petitioner was constructively
dismissed from the service.

The petition is impressed with merit.

It is a well-established rule that the jurisdiction of this Court in cases brought before it from the
Court of Appeals via Rule 45 of the same Rules is limited to reviewing errors of law.6 This Court is not
a trier of facts. In the exercise of its power of review, the findings of facts of the Court of Appeals are
conclusive and binding. Thus, it is not the function of this Court to analyze and weigh the evidence all
over again.7

In the instant case, however, we have to determine the appellate court's findings of facts since they
contradict those of the Labor Arbiter.

After a careful scrutiny of the records, we agree with the Labor Arbiter that petitioner was
constructively dismissed from employment.

Respondents argue that petitioner's act of retrieving the document from the files inside the rector's
office was improper and constituted a willful breach of the trust reposed upon her by Fr. Bustamante.
Such breach of trust is a just cause for terminating her services.

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.8 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.9

In Nokom v. National Labor Relations Commission,10 we set the guidelines for the application of loss
of confidence as a just cause for dismissing an employee from the service, thus:

A. loss of confidence should not be simulated;

b. it should not be used as a subterfuge for causes which are improper, illegal or unjustified;

c. it may not be arbitrarily asserted in the face of overwhelming evidence to the contrary; and

d. it must be genuine, not a mere afterthought to justify earlier action taken in bad faith.

In the instant case, Fr. Bustamante entrusted to petitioner various documents in his office.
She could take any document from the filing cabinet inside his office. While she retrieved
documents pertaining to the efficiency ratings of all teachers in the school for the year
1990-1991, such act did not constitute a breach of trust and confidence since she did not
show those documents to any other person except to Fr. Bustamante himself. Significantly,
he did not dispute the fact that petitioner had access to the records.

When petitioner asked Fr. Bustamante why her husband's performance rating was low, Fr.
Remirez summoned her to his office and urged her to tender her resignation within 30
minutes. He threatened her that if she would not resign, her separation pay would be
Labor II – 1
forfeited. These circumstances glaringly show that respondents wanted to terminate her
employment, but they made it appear that she voluntarily resigned.

Resignation is the voluntary act of employees who are compelled by personal reasons to
disassociate themselves from their employment. It must be done with the intention of
relinquishing an office, accompanied by the act of abandonment. 11 It would have been illogical
therefore for the petitioner to resign and then file a complaint for illegal dismissal.
ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

Resignation is inconsistent with the filing of the complaint.12

An examination of the records of this case convinced us that petitioner was indeed made to resign
against her will with threat that she will not be given her separation pay should she fail to do so.
Clearly, her consent was vitiated. Indeed, it is very unlikely that petitioner, who worked in the school
for almost fifteen (15) years, would simply resign voluntarily. Her receipt of the benefits could be
considered as an act of self preservation, taking into consideration the financial predicament she and
her family were then facing.

Thus, we rule that petitioner was constructively dismissed from her employment. There is
constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer
becomes so unbearable on the part of the employee that it would foreclose any choice by him except
to forego her continued employment.13 It exists where there is cessation of work because "continued
employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in
rank and a diminution in pay."14 Respondent Fr. Bustamante claimed that he had lost trust and
confidence in petitioner. Under this circumstance, coupled with Fr. Remirez's threat that she would
not be given her separation pay, petitioner was compelled to resign.

Petitioner's intention to leave the school, as well as her act of relinquishment, is not present in the
instant case.  On the contrary, she vigorously pursued her complaint against respondents. It is a
chanrobles virtual law library

clear manifestation that she had no intention of relinquishing her employment. That Fr. Remirez
convinced her to resign or else she will not receive her separation pay obviously shows that
respondents wanted to get rid of her under the guise of voluntary resignation.

Under Article 279 of the Labor Code, 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. Considering, however, that the nature of petitioner's work requires constant
interaction with Fr. Bustamante, their working relationship has been strained. Thus, the payment of
separation pay and other benefits in lieu of reinstatement is in order. 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.15

In fine, we hold that the Court of Appeals erred when it ruled that petitioner voluntarily resigned
from employment.

WHEREFORE, we GRANT the petition. The assailed Decision and Resolution of the Court of Appeals in
CA-G.R. SP. No. 59424 are REVERSED. The Decision of the Labor Arbiter is hereby REINSTATED
with MODIFICATION in the sense that respondents are ordered to pay petitioner separation pay
equivalent to one (1) month salary for every year of service rendered, plus full backwages and
other privileges and benefits, or their monetary equivalent, computed from her dismissal until the
finality of this Decision. From these amounts shall be deducted the separation pay she already
received in advance.

Labor II – 1
Labor II – 1
 42.) [G.R. No. 181146 : January 26, 2011]

THE UNIVERSITY OF THE IMMACULATE CONCEPTION AND MO. MARIA ASSUMPTA DAVID,
RVM, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION AND TEODORA
AXALAN, RESPONDENTS.

DECISION

CARPIO, J.:

The Case

This is a petition for review on certiorari[1] of the 13 December 2007 Decision[2] of the Court of
Appeals in CA-G.R. SP No. 00812 affirming the 15 August 2005 and the 24 October 2005
Resolutions[3] of the National Labor Relations Commission in NLRC CA No. M-008333-2005, which
sustained the 11 October 2004 Decision[4] of the Labor Arbiter in RAB-11-12-01187-03 ordering
petitioner to reinstate private respondent to her former position without loss of seniority rights and to
pay her backwages, salary differentials, damages, and attorney's fees. cralaw

The Facts

Petitioner University of the Immaculate Conception is a private educational institution located in

Davao City. Private respondent Teodora C. Axalan is a regular faculty member in the university
holding the position of Associate Professor II. Aside from being a regular faculty member, Axalan is
the elected president of the employees' union.[5]

From 18 November to 22 November 2002, Axalan attended a seminar in Quezon City on website
development. Axalan then received a memorandum[6] from Dean Maria Rosa Celestial asking her to
explain in writing why she should not be dismissed for having been absent without official leave.

In her letter,[7] Axalan claimed that she held online classes while attending the seminar. She
explained that she was under the impression that faculty members would not be marked absent even
if they were not physically present in the classroom as long as they conducted online classes.

In reply,[8] Dean Celestial relayed to Axalan the message of the university president that no
administrative charge would be filed if Axalan would admit having been absent without official leave
and write a letter of apology seeking forgiveness.

Convinced that she could not be deemed absent since she held online classes, Axalan opted not to
write the letter of admission and contrition the university president requested.[9] The Dean wrote
Axalan that the university president had created an ad hoc grievance committee to investigate the
AWOL charge.[10]

From 28 January to 3 February 2003, Axalan attended a seminar in Baguio City on advanced
paralegal training. Dean Celestial wrote Axalan informing her that her participation in the paralegal
seminar in Baguio City was the subject of a second AWOL charge.[11] The dean asked Axalan to
explain in writing why no disciplinary action should be taken against her.[12]

In her letter,[13] Axalan explained that before going to Baguio City for the seminar, she sought the
approval of Vice-President for Academics Alicia Sayson. In a letter,[14] VP Sayson denied having
approved Axalan's application for official leave. The VP stated in her letter that it was the university
Labor II – 1
president, Maria Assumpta David, who must approve the application.

After conducting hearings and receiving evidence, the ad hoc grievance committee found Axalan to
have incurred AWOL on both instances and recommended that Axalan be suspended without pay for
six months on each AWOL charge.[15] The university president approved the committee's
recommendation.

The university president then wrote Axalan informing her that she incurred absences without official
leave when she attended the seminars on website development in Quezon City and on advanced
paralegal training in Baguio City on 18-22 November 2002 and on 28 January-3 February 2003,
respectively. In the same letter, the university president informed Axalan that the total penalty of
one-year suspension without pay for both AWOL charges would be effective immediately.[16]

On 1 December 2003, Axalan filed a complaint[17] against the university for illegal suspension,
constructive dismissal, reinstatement with backwages, and unfair labor practice with prayer for
damages and attorney's fees.

The university moved to dismiss the complaint on the ground that the Labor Arbiter had no
jurisdiction over the subject matter of the complaint. The university maintained that jurisdiction lay
in the voluntary arbitrator.[18]

In denying the university's motion to dismiss, the Labor Arbiter held that there being no existing
collective bargaining agreement between the parties, no grievance machinery was constituted, which
barred resort to voluntary arbitration.[19]

Meanwhile, upon the expiration of the one-year suspension, Axalan promptly resumed teaching at
the university on 1 October 2004.

The Ruling of the Labor Arbiter

On 11 October 2004, the Labor Arbiter rendered a Decision holding that the suspension of Axalan
amounted to constructive dismissal entitling her to reinstatement and payment of backwages, salary
differentials, damages, and attorney's fees, thus:

WHEREFORE, premises laid, judgment is hereby rendered declaring that the suspension of
complainant amounted to constructive dismissal, and as such, she is entitled to reinstatement and
payment of her full backwages reckoned from the time it was withheld from her up to the time of
reinstatement. Accordingly, Respondent University of the Immaculate Conception acting through its
President, Respondent Mo. Maria Assumpta David, RVM, is directed to reinstate the complainant to
her former position without loss of seniority rights and to pay her the sum of Five Hundred Forty
Three Thousand Four Hundred Fifty Two Pesos (P543,452.00) representing her backwages, salary
differentials (diminution) and damages plus ten percent (10%) thereof as attorney's fees or the sum
of P54,345.20.

The Respondent UIC and its President are hereby directed to inform this Office of the mode of
compliance it will avail itself by reason of the Order of reinstatement.

SO ORDERED.[20]

The university appealed the Labor Arbiter's Decision to the National Labor Relations Commission
(NLRC). It challenged the jurisdiction of the Labor Arbiter insisting that the voluntary arbitrator had
Labor II – 1
jurisdiction over the labor dispute. The university pointed out that when the Labor Arbiter rendered
his Decision on 11 October 2004, Axalan had returned to work on 1 October 2004 upon the
expiration of the one-year suspension.

The Ruling of the NLRC

The NLRC held that the Labor Arbiter, not the voluntary arbitrator, had jurisdiction as the controversy
did not pertain to a dispute involving the union and the university. In its 15 August 2005 Resolution,
the NLRC ruled:

WHEREFORE, for want of merit, the instant appeal is hereby DISMISSED.

SO ORDERED.[21]

NLRC Commissioner Jovito C. Cagaanan, in his dissenting opinion,[22] stressed that the parties
previously agreed to submit the dispute to voluntary arbitration, which cast doubt on the jurisdiction
of the Labor Arbiter.

The university moved for reconsideration of the NLRC Resolution. But the NLRC, in its 24 October
2005 Resolution,[23] denied the motion for reconsideration for lack of merit. The university challenged
both Resolutions of the NLRC before the Court of Appeals via a petition for certiorari.

The Ruling of the Court of Appeals

The Court of Appeals affirmed the findings of the Labor Arbiter and the NLRC. In its 13 December
2007 Decision, the Court of Appeals dismissed the university's petition for certiorari, thus:

We find no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of public
respondent in affirming the Labor Arbiter. Respondent Commission's ruling finds more than ample
support in statutory and case law. It cannot, therefore, be characterized as whimsical, arbitrary, or
oppressive.

WHEREFORE, the instant petition is hereby DISMISSED.

SO ORDERED.[24]

Dissatisfied, the university filed in this Court the instant petition for review on certiorari.

The Issues

The issues for resolution are (1) whether the voluntary arbitrator had jurisdiction over the labor
dispute; (2) whether Axalan was constructively dismissed; and (3) whether the Labor Arbiter's
computation of backwages, damages, and attorney's fees was correct.

Labor II – 1
 The Court's Ruling

The petition is impressed with merit.

The university contends that based on the transcript of stenographic notes from the ad hoc grievance
committee hearing held on 20 February 2003, the parties agreed that the voluntary arbitrator would
have jurisdiction over the labor dispute. The university maintains that Axalan's suspension does not
constitute constructive dismissal and that the Labor Arbiter's decision treating it as such is an
attempt to make it appear that the voluntary arbitrator has no jurisdiction. The university points out
that for constructive dismissal to exist, there must be severance of employment by the employee
because of unbearable act of discrimination, insensibility, or disdain on the part of the employer
leaving the employee with no choice but to forego continued employment. The university claims that
on the contrary, Axalan eagerly reported for work as soon as the one-year suspension was over. The
university further argues that assuming Axalan is entitled to backwages, it should have been based
on Axalan's average gross monthly income at the time she was suspended in SY2003-2004, which
was P14,145.00, not on her average gross monthly income in SY2002-2003, which was P18,502.00.

Private respondent Axalan counters that the university raises the same factual issues already decided
unanimously by the Labor Arbiter, the NLRC, and the Court of Appeals. On the issue of jurisdiction,
Axalan stresses that the present labor case, being a complaint for constructive dismissal and unfair
labor practice, is within the jurisdiction of the Labor Arbiter. On the finding of constructive dismissal,
Axalan points out that the Labor Arbiter's factual finding of constructive dismissal, when affirmed by
the NLRC and the Court of Appeals, binds this Court. Axalan claims that both AWOL charges against
her were without basis and were only a form of harassment amounting to unfair labor practice. As to
the computation of the award of backwages, Axalan points out that her average gross monthly
income in SY2002-2003 was reduced in SY2003-2004 precisely because she was not given an
overload of two extra assignments resulting in the diminution of her income. Axalan maintains that
the award of damages was just proper considering that her suspension was without basis and
amounted to unfair labor practice.

Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari is limited
to reviewing only errors of law, not of fact, unless the factual findings being assailed are not
supported by the evidence on record or the impugned judgment is based on a misapprehension of
facts. Patently erroneous findings of the Labor Arbiter, even when affirmed by the NLRC and the
Court of Appeals, are not binding on this Court.[25]

As to the first issue, Article 217 of the Labor Code states that unfair labor practices and termination
disputes fall within the original and exclusive jurisdiction of the Labor Arbiter:

ART. 217. Jurisdiction of Labor Arbiters and the Commission. - (a) Except as otherwise provided
under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and
decide x x x the following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

x x x x (Emphasis supplied)

Labor II – 1
ARTICLE 262 of the same Code provides the exception:

ART. 262. Jurisdiction over other labor disputes. - 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. (Emphasis supplied)

In San Miguel Corp. v. NLRC,[26] the Court ruled that for the exception to apply, there must be
agreement between the parties clearly conferring jurisdiction to the voluntary arbitrator. Such
agreement may be stipulated in a collective bargaining agreement. However, in the absence of a
collective bargaining agreement, it is enough that there is evidence on record showing the parties
have agreed to resort to voluntary arbitration.[27]

As can be gleaned from the transcript of stenographic notes of the administrative hearing held on 20
February 2003, the parties in this case clearly agreed to resort to voluntary arbitration. To quote the
exact words of the parties' counsels:

Atty. Dante Sandiego: x x x So, are we to understand that the decision of the President shall be
without prejudice to the right of the employees to contest the validity or legality of his dismissal or of
the disciplinary action imposed upon him by asking for voluntary arbitration under the Labor Code or
when applicable availing himself of the grievance machinery under the Labor Code which ends in
voluntary arbitration. That will be the steps that we will have to follow.

Atty. Sabino Padilla, Jr.: Yes, agreed.[28]

Thus, the Labor Arbiter should have immediately disposed of the complaint and referred the same to
the voluntary arbitrator when the university moved to dismiss the complaint for lack of jurisdiction.

No less than Section 3, Article XIII of the Constitution declares as state policy the preferential use of
voluntary modes in settling disputes, to wit:

Sec. 3. x x x x The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial peace. (Emphasis
supplied)

As to the second issue, constructive dismissal occurs when there is cessation of work because
continued employment is rendered impossible, unreasonable, or unlikely as when there is a demotion
in rank or diminution in pay or when a clear discrimination, insensibility, or disdain by an employer
becomes unbearable to the employee leaving the latter with no other option but to quit.[29]

In this case however, there was no cessation of employment relations between the parties. It is
unrefuted that Axalan promptly resumed teaching at the university right after the expiration of the
suspension period. In other words, Axalan never quit. Hence, Axalan cannot claim that she was left
with no choice but to quit, a crucial element in a finding of constructive dismissal. Thus, Axalan
cannot be deemed to have been constructively dismissed.

Significantly, at the time the Labor Arbiter rendered his Decision on 11 October 2004, Axalan had
already returned to her teaching job at the university on 1 October 2004. The Labor Arbiter's
Decision ordering the reinstatement of Axalan, who at the time had already returned to work, is thus
absurd.
Labor II – 1
There being no constructive dismissal, there is no legal basis for the Labor Arbiter's order of
reinstatement as well as payment of backwages, salary differentials, damages, and attorney's fees.
[30]
 Thus, the third issue raised in the petition is now moot.

Note that on the first AWOL incident, the university even offered to drop the AWOL charge against
Axalan if she would only write a letter of contrition. But Axalan adamantly refused knowing fully well
that the administrative case would take its course leading to possible sanctions. She cannot now be
heard that the imposition of the penalty of six-month suspension without pay for each AWOL charge
is unreasonable. We are convinced that Axalan was validly suspended for cause and in accord with
procedural due process.

The Court recognizes the right of employers to discipline its employees for serious violations of
company rules after affording the latter due process and if the evidence warrants. The university,
after affording Axalan due process and finding her guilty of incurring AWOL on two separate
occasions, acted well within the bounds of labor laws in imposing the penalty of six-month
suspension without pay for each incidence of AWOL.

As a learning institution, the university cannot be expected to take lightly absences without official
leave among its employees, more so among its faculty members even if they happen to be union
officers. To do so would send the wrong signal to the studentry and the rest of its teaching staff that
irresponsibility is widely tolerated in the academe.

The law protects both the welfare of employees and the prerogatives of management.[31] Courts will
not interfere with prerogatives of management on the discipline of employees, as long as they do not
violate labor laws, collective bargaining agreements if any, and general principles of fairness and
justice.[32]
cralaw

WHEREFORE, we GRANT the petition. The 13 December 2007 Decision of the Court of Appeals in
CA-G.R. SP No. 00812 affirming the 15 August 2005 and the 24 October 2005 Resolutions of the
National Labor Relations Commission in NLRC CA No. M-008333-2005, which sustained the 11
October 2004 Decision of the Labor Arbiter in RAB-11-12-01187-03, is SET ASIDE

Labor II – 1
 43.) G.R. No. 177937 : January 19, 2011

ROBINSONS GALLERIA/ROBINSONS SUPERMARKET CORPORATION and/or JESS

MANUEL, Petitioners, v. IRENE R. RANCHEZ, Respondent.

DECISION

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing
the Decision1  dated August 29, 2006 and the Resolution2  dated May 16, 2007 of the Court of
cralaw cralaw

Appeals (CA) in CA-G.R. SP No. 91631.

The Facts

The facts of the case are as follows.

Respondent was a probationary employee of petitioner Robinsons Galleria/Robinsons Supermarket

Corporation (petitioner Supermarket) for a period of five (5) months, or from October 15, 1997 until
March 14, 1998.3  She underwent six (6) weeks of training as a cashier before she was hired as such
cralaw

on October 15, 1997.4 cralawredlaw

Two weeks after she was hired, or on October 30, 1997, respondent reported to her supervisor the
loss of cash amounting to Twenty Thousand Two Hundred Ninety-Nine Pesos ( P 20,299.00) which
she had placed inside the company locker. Petitioner Jess Manuel (petitioner Manuel), the Operations
Manager of petitioner Supermarket, ordered that respondent be strip-searched by the company
guards. However, the search on her and her personal belongings yielded nothing.5 cralawredlaw

Respondent acknowledged her responsibility and requested that she be allowed to settle and pay the
lost amount. However, petitioner Manuel did not heed her request and instead reported the matter to
the police. Petitioner Manuel likewise requested the Quezon City Prosecutor's Office for an inquest.6 cralawredlaw

On November 5, 1997, an information for Qualified Theft was filed with the Quezon City Regional
Trial Court. Respondent was constrained to spend two weeks in jail for failure to immediately post
bail in the amount of Forty Thousand Pesos ( P 40,000.00).7 cralawredlaw

On November 25, 1997, respondent filed a complaint for illegal dismissal and damages.8 cralawredlaw

On March 12, 1998, petitioners sent to respondent by mail a notice of termination and/or notice of
expiration of probationary employment dated March 9, 1998.9 cralawredlaw

On August 10, 1998, the Labor Arbiter rendered a decision,10  the fallo of which reads:  cralaw chanrob1esvirtwallawlibrary

CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered dismissing the claim of
illegal dismissal for lack of merit.

Respondents are ordered to accept complainant to her former or equivalent work without prejudice to
any action they may take in the premises in connection with the missing money of P 20,299.00.

SO ORDERED.11 cralawredlaw

Labor II – 1
In dismissing the complaint for illegal dismissal, the Labor Arbiter ratiocinated that at the time
respondent filed the complaint for illegal dismissal, she was not yet dismissed by petitioners. When
she was strip- searched by the security personnel of petitioner Supermarket, the guards were merely
conducting an investigation. The subsequent referral of the loss to the police authorities might be
considered routine. Respondent's non-reporting for work after her release from detention could be
taken against her in the investigation that petitioner supermarket would conduct.12 cralawredlaw

On appeal, the National Labor Relations Commission (NLRC) reversed the decision of the Labor
Arbiter in a decision13  dated October 20, 2003. The dispositive portion of the decision reads: 
cralaw chanrob1esvirtwallawlibrary

WHEREFORE, the appealed decision is SET ASIDE. The respondents are hereby ordered to
immediately reinstate complainant to her former or equivalent position without loss of seniority rights
and privileges and to pay her full backwages computed from the time she was constructively
dismissed on October 30, 1997 up to the time she is actually reinstated.

SO ORDERED.14 cralawredlaw

In reversing the decision of the Labor Arbiter, the NLRC ruled that respondent was denied due
process by petitioners. Strip-searching respondent and sending her to jail for two weeks certainly
amounted to constructive dismissal because continued employment had been rendered impossible,
unreasonable, and unlikely. The wedge that had been driven between the parties was impossible to
ignore.15  Although respondent was only a probationary employee, the subsequent lapse of her
cralaw

probationary contract of employment did not have the effect of validly terminating her employment
because constructive dismissal had already been effected earlier by petitioners.16 cralawredlaw

Petitioners filed a motion for reconsideration, which was denied by the NLRC in a resolution17  dated cralaw

July 21, 2005.

Petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before the CA. On August
29, 2006, the CA rendered a Decision, the dispositive portion of which reads:  chanrob1esvirtwallawlibrary

WHEREFORE, premises considered, the challenged Decision of the National Labor Relations
Commission is AFFIRMED with MODIFICATION in that should reinstatement be no longer possible
in view of the strained relation between the parties, Petitioners are ordered to pay Respondent
separation pay equivalent to one (1) month pay in addition to backwages from the date of dismissal
until the finality of the assailed decision.

SO ORDERED.18 cralawredlaw

Petitioners filed a motion for reconsideration. However, the CA denied the same in a Resolution dated
May 16, 2007.

Hence, this petition.

Petitioners assail the reinstatement of respondent, highlighting the fact that she was a probationary
employee and that her probationary contract of employment lapsed on March 14, 1998. Thus, her
reinstatement was rendered moot and academic. Furthermore, even if her probationary contract had
not yet expired, the offense that she committed would nonetheless militate against her
regularization.19 cralawredlaw

On the other hand, respondent insists that she was constructively dismissed by petitioner
Supermarket when she was strip-searched, divested of her dignity, and summarily thrown in jail. She
could not have been expected to go back to work after being allowed to post bail because her
continued employment had been rendered impossible, unreasonable, and unlikely. She stresses that,
Labor II – 1
at the time the money was discovered missing, it was not with her but locked in the company locker.
The company failed to provide its cashiers with strong locks and proper security in the work place.
Respondent argues that she was not caught in the act and even reported that the money was
missing. She claims that she was denied due process.20 cralawredlaw

The Issue

The sole issue for resolution is whether respondent was illegally terminated from employment by
petitioners.

The Ruling of the Court

We rule in the affirmative.

There is probationary employment when the employee upon his engagement is made to undergo a
trial period during which the employer determines his fitness to qualify for regular employment based
on reasonable standards made known to him at the time of engagement.21 cralawredlaw

A probationary employee, like a regular employee, enjoys security of tenure.22  However, in cases of cralaw

probationary employment, aside from just or authorized causes of termination, an additional ground
is provided under Article 281 of the Labor Code, i. e., the probationary employee may also be
terminated for failure to qualify as a regular employee in accordance with reasonable standards made
known by the employer to the employee at the time of the engagement. Thus, the services of an
employee who has been engaged on probationary basis may be terminated for any of the following:
(1) a just or (2) an authorized cause; and (3) when he fails to qualify as a regular employee in
accordance with reasonable standards prescribed by the employer.23 cralawredlaw

Article 277(b) of the Labor Code mandates that subject to the constitutional right of workers to
security of tenure and their right to be protected against dismissal, except for just and authorized
cause and without prejudice to the requirement of notice under Article 283 of the same Code, the
employer shall furnish the worker, whose employment is sought to be terminated, a written notice
containing a statement of the causes of termination, and shall afford the latter ample opportunity to
be heard and to defend himself with the assistance of a representative if he so desires, in accordance
with company rules and regulations pursuant to the guidelines set by the Department of Labor and
Employment.

In the instant case, based on the facts on record, petitioners failed to accord respondent substantive
and procedural due process. The haphazard manner in the investigation of the missing cash, which
was left to the determination of the police authorities and the Prosecutor's Office, left respondent
with no choice but to cry foul. Administrative investigation was not conducted by petitioner
Supermarket. On the same day that the missing money was reported by respondent to her
immediate superior, the company already pre-judged her guilt without proper investigation, and
instantly reported her to the police as the suspected thief, which resulted in her languishing in jail for
two weeks.

As correctly pointed out by the NLRC, the due process requirements under the Labor Code are
mandatory and may not be supplanted by police investigation or court proceedings. The criminal
aspect of the case is considered independent of the administrative aspect. Thus, employers should
not rely solely on the findings of the Prosecutor's Office. They are mandated to conduct their own
separate investigation, and to accord the employee every opportunity to defend himself.
Furthermore, respondent was not represented by counsel when she was strip-searched inside the
company premises or during the police investigation, and in the preliminary investigation before the
Prosecutor's Office.

Labor II – 1
Respondent was constructively dismissed by petitioner Supermarket effective October 30, 1997. It
was unreasonable for petitioners to charge her with abandonment for not reporting for work upon her
release in jail. It would be the height of callousness to expect her to return to work after suffering in
jail for two weeks. Work had been rendered unreasonable, unlikely, and definitely impossible,
considering the treatment that was accorded respondent by petitioners.

As to respondent's monetary claims, Article 279 of the Labor Code provides that an employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges, to full backwages, inclusive of allowances, and to 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, due to the strained relations of the parties, the payment of
separation pay has been considered an acceptable alternative to reinstatement, when the latter
option is no longer desirable or viable. On the one hand, such payment liberates the employee from
what could be a highly oppressive work environment. On the other, the payment releases the
employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no
longer trust.24cralawredlaw

Thus, as an illegally or constructively dismissed employee, respondent is entitled to: (1) either
reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and (2) backwages.
These two reliefs are separate and distinct from each other and are awarded conjunctively.25 cralawredlaw

In this case, since respondent was a probationary employee at the time she was constructively
dismissed by petitioners, she is entitled to separation pay and backwages. Reinstatement of
respondent is no longer viable considering the circumstances.

However, the backwages that should be awarded to respondent shall be reckoned from the time of
her constructive dismissal until the date of the termination of her employment, i.e., from October 30,
1997 to March 14, 1998. The computation should not cover the entire period from the time her
compensation was withheld up to the time of her actual reinstatement. This is because respondent
was a probationary employee, and the lapse of her probationary employment without her
appointment as a regular employee of petitioner Supermarket effectively severed the employer-
employee relationship between the parties.

In all cases involving employees engaged on probationary basis, the employer shall make known to
its employees the standards under which they will qualify as regular employees at the time of their
engagement. Where no standards are made known to an employee at the time, he shall be deemed a
regular employee,26  unless the job is self-descriptive, like maid, cook, driver, or messenger.
cralaw

However, the constitutional policy of providing full protection to labor is not intended to oppress or
destroy management.27  Naturally, petitioner Supermarket cannot be expected to retain respondent
cralaw

as a regular employee considering that she lost P 20,299.00 while acting as a cashier during the
probationary period. The rules on probationary employment should not be used to exculpate a
probationary employee who acts in a manner contrary to basic knowledge and common sense, in
regard to which, there is no need to spell out a policy or standard to be met.28cralawredlaw

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the Court of Appeals
in CA-G.R. SP No. 91631 is hereby AFFIRMED with the MODIFICATION that petitioners are hereby
ordered to pay respondent Irene R. Ranchez separation pay equivalent to one (1) month pay and
backwages from October 30, 1997 to March 14, 1998.

Labor II – 1
44.) G.R. No. 191455               March 12, 2014

DREAMLAND HOTEL RESORT and WESTLEY J. PRENTICE, Petitioners,

vs.
STEPHEN B. JOHNSON, Respondent.

DECISION

REYES, J.:

Before the Court is a Petition for Review on Certiorari  assailing the December 14, 2009  and February 11,
1 2

2010  Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 111693 which dismissed outright the petition for
3

certiorari on technical grounds.

Dreamland Hotel Resort (Dreamland) and its President, Westley J. Prentice (Prentice) (petitioners) alleged the
following facts in the instant petition:

9. Dreamland is a corporation duly registered with the Securities and Exchange Commission on January 15, 2003 to
exist for a period of fifty [50] years with registration number SEC A 1998-6436. Prentice is its current President and
Chief Executive Officer. It is engaged in the hotel, restaurant and allied businesses. Dreamland is presently
undertaking operations of its business at National Highway, Sto. Tomas, Matain Subic, Zambales, 2209.

10. Respondent Stephen B. Johnson is an Australian citizen who came to the Philippines as a businessman/investor
without the authority to be employed as the employee/officer of any business as he was not able to secure his Alien
Employment Permit ["AEP" for brevity], which fact was duly supported by the Certification dated March 14, 2008 of
the Department of Labor and Employment ["DOLE" for brevity] Regional Director, Regional Office No. III, San
Fernando City, Pampanga,

x x x.

11. As a fellow Australian citizen, Johnson was able to convince Prentice to accept his offer to invest in Dreamland
and at the same time provide his services as Operations Manager of Dreamland with a promise that he will secure
an AEP and Tax Identification Number ["TIN" for brevity] prior to his assumption of work.

12. Sometime on June 21, 2007, Prentice and Johnson entered into an Employment Agreement, which stipulates
among others, that the [sic] Johnson shall serve as Operations Manager of Dreamland from August 1, 2007 and
shall serve as such for a period of three (3) years.

13. Before entering into the said agreement[,] Prentice required the submission of the AEP and TIN from Johnson.
Johnson promised that the same shall be supplied within one (1) month from the signing of the contract because the
application for the TIN and AEP were still under process. Thus[,] it was agreed that the efficacy of the said
agreement shall begin after one (1) month or on August 1, 2007. x x x.

14. On or about October 8, 2007, Prentice asked on several occasions the production of the AEP and TIN from
Johnson. Johnson gave excuses and promised that he is already in possession of the requirements. Believing the
word of Johnson, Dreamland commenced a dry run of its operations.

15. Johnson worked as a hotel and resort Operations Manager only at that time. He worked for only about three (3)
weeks until he suddenly abandoned his work and subsequently resigned as Operations Manager starting November
3, 2007. He never reported back to work despite several attempts of Prentice to clarify his issues. x x x.
4

On the other hand, respondent Stephen B. Johnson (Johnson) averred that:

Labor II – 1
4. There is also no truth to the allegation that it was [Johnson] who "offered" and "convinced" petitioner Prentice to
"invest" in and provide his services to petitioner Dreamland Hotel Resort x x x. The truth of the matter is that it was
petitioners who actively advertised for a resort manager for Dreamland Hotel. x x x

5. It was in response to these advertisements that private respondent Johnson contacted petitioners to inquire on
the terms for employment offered. It was Prentice who offered employment and convinced Johnson to give out a
loan, purportedly so the resort can be completed and operational by August 2007. Believing the representations of
petitioner Prentice, private respondent Johnson accepted the employment as Resort Manager and loaned money to
petitioners [consisting of] his retirement pay in the amount of One Hundred Thousand US Dollars (USD 100,000.00)
to finish construction of the resort. x x x.

6. From the start of August 2007, as stipulated in the Employment Agreement, respondent Johnson already
reported for work. It was then that he found out to his dismay that the resort was far from finished. However, he was
instructed to supervise construction and speak with potential guests. He also undertook the overall preparation of
the guestrooms and staff for the opening of the hotel, even performing menial tasks (i.e. inspected for cracked tiles,
ensured proper grout installation, proper lighting and air-conditioning unit installation, measured windows for curtain
width and showers for shower curtain rods, unloaded and installed mattresses, beddings, furniture and appliances
and even ironed and hung guest room curtains).

xxxx

8. As [Johnson] remained unpaid since August 2007 and he has loaned all his money to petitioners, he asked for his
salary after the resort was opened in October 2007 but the same was not given to him by petitioners. [Johnson]
became very alarmed with the situation as it appears that there was no intention to pay him his salary, which he now
depended on for his living as he has been left penniless. He was also denied the benefits promised him as part of
his compensation such as service vehicles, meals and insurance.

9. [Johnson] was also not given the authority due to him as resort manager. Prentice countermanded his orders to
the staff at every opportunity. Worse, he would even be berated and embarrassed in front of the staff. Prentice
would go into drunken tiffs, even with customers and [Johnson] was powerless to prohibit Prentice. It soon became
clear to him that he was only used for the money he loaned and there was no real intention to have him as resort
manager of Dreamland Hotel.

10. Thus, on November 3, 2007, after another embarrassment was handed out by petitioner Prentice in front of the
staff, which highlighted his lack of real authority in the hotel and the disdain for him by petitioners, respondent
Johnson was forced to submit his resignation, x x x. In deference to the Employment Agreement signed, [Johnson]
stated that he was willing to continue work for the three month period stipulated therein.

11. However, in an SMS or text message sent by Prentice to [Johnson] on the same day at around 8:20 pm, he was
informed that "… I consider [yo]ur resignation as immediate". Despite demand, petitioners refused to pay [Johnson]
the salaries and benefits due him. 5

On January 31, 2008, Johnson filed a Complaint for illegal dismissal and non-payment of salaries, among others,
against the petitioners.

On May 23, 2008, the Labor Arbiter (LA) rendered a Decision  dismissing Johnson’s complaint for lack of merit with
6

the finding that he voluntarily resigned from his employment and was not illegally dismissed. We quote:

There [is] substantial evidence on record that [Johnson] indeed resigned voluntarily from his position by his mere act
of tendering his resignation and immediately abandoned his work as Operations Manager from the time that he filed
said resignation letter on November 3, 2007 and never returned to his work up to the filing of this case. Evidence on
record also show that [Johnson] only served as Operations Manager for a period of three (3) weeks after which he
tendered his voluntary resignation and left his job. This fact was not denied or questioned by him. His claim that
there was breach of employment contract committed by the respondents and that he was not refunded his alleged
investment with the respondent Dreamland Hotel and Resort were not properly supported with substantial evidence
and besides these issues are not within the ambit of jurisdiction of this Commission.

Labor II – 1
There being competent, concrete and substantial evidence to confirm the voluntary resignation of [Johnson] from his
employment, there was no illegal dismissal committed against him and for him to be entitled to reinstatement to his
former position and backwages.

xxxx

WHEREFORE, premises considered, let this case be as it is hereby ordered DISMISSED for lack of merit.

All the money claims of the complainant are likewise ordered dismissed for lack of legal basis.

SO ORDERED. 7

Dissatisfied, Johnson appealed to the National Labor Relations Commission (NLRC). The NLRC rendered its
Decision  on April 30, 2009, the dispositive portion of which reads:
8

WHEREFORE, the decision appeared from is hereby REVERSED. Respondent Wes[t]ley Prentice and/or
Dreamland Resort & Hotel, Inc[.] are hereby ordered to pay [Johnson] the following:

1. Backwages computed at [P]60,000.00 monthly from November

3, 2007 up to the finality of this decision;

2. Separation pay equivalent to one month’s salary, or [P]60,000.00;

3. Unpaid salaries from August 1, 2007 to November 1, 2007 amounting to a total of [P]172,800.00.

SO ORDERED. 9

The NLRC also noted the following:

Insofar as the charge of abandonment against [Johnson] is concerned, it is significant that the contention that
[Johnson] received a total of [P]172,000.00 from the [petitioners] since July 2007 is not supported by the evidence x
x x submitted by the [petitioners]. Except for a promissory note x x x for [P]2,200.00, the pieces of evidence in
question do not bear [Johnson’s] signature, and do not therefore constitute proof of actual receipt by him of the
amounts stated therein. Thus, based on the evidence and on the admission by [Johnson] that he received the
amount of [P]5,000.00 from the [petitioners], it appears that [Johnson] received a total of only [P]7,200.00 from the
[petitioners]. Since based on the Employment Agreement, his employment commenced on August 1, 2007, it follows
that as of November 3, 2007, when he tendered his resignation, the [petitioners] had failed to pay him a total of
[P]172,800.00 representing his unpaid salaries for three months ([P]60,000.00 x 3 mos. = [P]180,000.00 – [P]7,200
= [P]172,800.00). Even the most reasonable employee would consider quitting his job after working for three months
and receiving only an insignificant fraction of his salaries. There was, therefore, not an abandonment of employment
nor a resignation in the real sense, but a constructive dismissal, which is defined as an involuntary resignation
resorted to when continued employment is rendered impossible, unreasonable or unlikely x x x. Consequently,
[Johnson] is entitled to reinstatement with full backwages. However, due to the strained relation between the parties,
which renders his reinstatement inadvisable, separation pay may be awarded in lieu of reinstatement. 10

Consequently, the petitioners elevated the NLRC decision to the CA by way of Petition for Certiorari with Prayer for
the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction under Rule 47.

In the assailed Resolution  dated December 14, 2009, the CA dismissed the petition for lack of proof of authority
11

and affidavit of service of filing as required by Section 13 of the 1997 Rules of Procedure. The subsequent motion
for reconsideration filed by the petitioners was likewise denied by the CA in a Resolution  dated February 11, 2010.
12

Undaunted, the petitioners filed before this Court the present Petition for Review on Certiorari, raising the following
issues, viz:

Labor II – 1
 A.

THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS FIRST

RESOLUTION (DECEMBER 14, 2009) WHICH OUTRIGHTLY DISMISSED PETITIONERS’ PETITION FOR
CERTIORARI.

B.

THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN PROMULGATING ITS SECOND

RESOLUTION (FEBRUARY 11, 2010) WHICH DENIED FOR LACK OF MERIT PETITIONERS’ MOTION
FOR RECONSIDERATION.

C.

THE HONORABLE [CA] COMMITTED A REVERSIBLE ERROR IN NOT GIVING DUE CONSIDERATION
TO THE MERITS OF THE PETITIONERS’ PETITION AND IN NOT GRANTING THEIR PRAYER FOR
TEMPORARY RESTRAINING ORDER[.] 13

The petition is partially granted.

At its inception, the Court takes note of the Resolutions dated December 14, 2009 and February 11, 2010 of the CA
dismissing the Petition for Certiorari due to the following infirmities:

1. The affiant has no proof of authority to file the petition in behalf of petitioner Dreamland.

2. The petition has no appended affidavit of service to show proof of service of filing as required by Sec. 13
of the 1997 Rules of Civil Procedure. 14

To justify their stance that the CA should have considered the merits of the case, instead of dismissing merely on
procedural grounds, the petitioners cited numerous cases wherein the Court has decided to waive the strict
application of the Rules in the interest of substantial justice.  While "[u]tter disregard of [the rules of procedure]
15

cannot justly be rationalized by harking on the policy of liberal construction,"  the Court recognizes badges of
16

inequity present in the case at bar, which would be seemingly branded with approval should the Court turn a blind
eye and dismiss this petition on procedural grounds alone.

"While it is desirable that the Rules of Court be faithfully observed, courts should not be so strict about procedural
lapses that do not really impair the proper administration of justice. If the rules are intended to ensure the proper
and orderly conduct of litigation, it is because of the higher objective they seek which are the attainment of justice
and the protection of substantive rights of the parties. Thus, the relaxation of procedural rules, or saving a particular
case from the operation of technicalities when substantial justice requires it, as in the instant case, should no longer
be subject to cavil."17

Time and again, this Court has emphasized that procedural rules should be treated with utmost respect and due
regard, since they are designed to facilitate the adjudication of cases to remedy the worsening problem of delay in
the resolution of rival claims and in the administration of justice. "From time to time, however, we have recognized
exceptions to the Rules but only for the most compelling reasons where stubborn obedience to the Rules would
defeat rather than serve the ends of justice."  "It is true that procedural rules may be waived or dispensed with in the
18

interest of substantial justice."

19

Brushing aside technicalities, in the utmost interest of substantial justice and taking into consideration the varying
and conflicting factual deliberations by the LA and the NLRC, the Court shall now delve into the merits of the case.

The petitioners contend that the employment of Johnson as operations manager commenced only on October 8,
2007 and not on August 1, 2007. However, the employment contract categorically stated that the "term of
employment shall commence on [August 1, 2007]." Furthermore, the factual allegations of Johnson that he actually

Labor II – 1
worked from August 1, 2007 were neither sufficiently rebutted nor denied by the petitioners. As Johnson has
specifically set forth in his reply before the LA:

Although the resort did not open until approximately 8th October 2007, [Johnson’s] employment began, as per
Employment Agreement, on 1st August 2007. During the interim period[, Johnson] was frequently instructed by
[Prentice] to supervise the construction staff and speak with potential future guests who visited the site out of
curiosity. Other duties carried out by [Johnson] prior to [the] opening included the overall preparation of the guest
rooms for eventual occupation ensuring cracked tiles were replaced, ensuring grout was properly installed between
tiles, ensuring all lighting and air conditioning [were] functioning, measuring windows for curtain width, measuring
showers for shower curtain rods and installing shower curtains. Other duties included the unloading, carrying and
installation of mattresses, bedding[s], TV’s, refrigerators and other furnishings and ironing curtains x x x.
20

Notably, it was only in their Motion for Reconsideration  of the NLRC decision where the petitioners belatedly
21

disagreed that Johnson performed the abovementioned tasks and argued that had Johnson done the tasks he
enumerated, those were tasks foreign and alien to his position as operations manager and [were done] without their
knowledge and consent. 22

Nevertheless, Prentice did not deny that he ordered Johnson to speak with potential guests of the hotel. In fact, the
petitioners admitted and submitted documents  which showed that Johnson has already taken his residence in the
23

hotel as early as July 2007—a part of Johnson’s remuneration as the hotel operations manager. In presenting such
documents, the petitioners would want to impress upon the Court that their act of accommodating Johnson was
merely due to his being a fellow Australian national.

As it could not be determined with absolute certainty whether or not Johnson rendered the services he mentioned
during the material time, doubt must be construed in his favor for the reason that "the consistent rule is that if doubt
exists between the evidence presented by the employer and that by the employee, the scales of justice must be
tilted in favor of the latter."  What is clear upon the records is that Johnson had already taken his place in the hotel
24

since July 2007.

For the petitioners’ failure to disprove that Johnson started working on August 1, 2007, as stated on the employment
contract, payment of his salaries on said date, even prior to the opening of the hotel is warranted.

The petitioners also maintain that they have paid the amount of ₱7,200.00 to Johnson for his three weeks of service
from October 8, 2007 until November 3, 2007, the date of Johnson’s resignation,  which Johnson did not controvert.
25

Even so, the amount the petitioners paid to Johnson as his three-week salary is significantly deficient as Johnson’s
monthly salary as stipulated in their contract is ₱60,000.00 . Thus, the amount which Johnson should have been
26

paid is ₱45,000.00 and not ₱7,200.00. In light of this deficiency, there is more reason to believe that the petitioners
withheld the salary of Johnson without a valid reason. If they indeed believed that Johnson deserves to be paid only
for three-week worth of service as operations manager, then they should still have paid him the amount due for
three weeks of work rendered.

Another argument posited by the petitioners is that the employment contract executed by the parties is inefficacious
because the employment contract is subject to the presentation of Johnson of his Alien Employment Permit (AEP)
and Tax Identification Number (TIN).

Again, this statement is wanting of merit.

Johnson has adduced proof that as a permanent resident, he is exempted from the requirement of securing an AEP
as expressed under Department Order No. 75-06, Series of 2006 of the Department of Labor and Employment
(DOLE), which we quote:

Rule I- Coverage and Exemption

xxxx

2. Exemption. The following categories of foreign nationals are exempt from securing an employment permit:
Labor II – 1
 xxxx

2.7 Resident foreign nationals

Furthermore, Johnson submitted a Certification  from DOLE Regional Office III, stating that he is exempted from
27

securing an AEP as a holder of Permanent Resident Visa. Consequently, the condition imposed upon Johnson’s
employment, if there is any, is in truth without effect to its validity.

Anent the requirement of securing a TIN to make the contract of employment efficacious, records show that
Johnson secured his TIN only on December 2007  after his resignation as operations manager. Nevertheless, this
28

does not negate the fact that the contract of employment had already become effective even prior to such date.

In addition to the foregoing, there is no stipulation in the employment contract itself that the same shall only be
effective upon the submission of AEP and TIN. The petitioners did not present any proof to support this agreement
prior to the execution of the employment contract. In the case of Ortañez v. CA , the Court held:
29

Spoken words could be notoriously unreliable unlike a written contract which speaks of a uniform language. Thus,
under the general rule in Section 9 of Rule 130 of the Rules of Court, when the terms of an agreement were
reduced to writing, as in this case, it is deemed to contain all the terms agreed upon and no evidence of such terms
can be admitted other than the contents thereof. x x x.  (Citations omitted)
30

As regards the NLRC findings that Johnson was constructively dismissed and did not abandon his work, the Court is
in consonance with this conclusion with the following basis:

Even the most reasonable employee would consider quitting his job after working for three months and receiving
only an insignificant fraction of his salaries. There was, therefore, not an abandonment of employment nor a
resignation in the real sense, but a constructive dismissal, which is defined as an involuntary resignation resorted to
when continued employment is rendered impossible, unreasonable or unlikely x x x. 31

The petitioners aver that considering that Johnson tendered his resignation and abandoned his work, it is his burden
to prove that his resignation was not voluntary on his part. 32

With this, the Court brings to mind its earlier ruling in the case of SHS Perforated Materials, Inc. v. Diaz  where it
33

held that:

"There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so
unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued
employment. It exists where there is cessation of work because continued employment is rendered impossible,
unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay." 34

It is impossible, unreasonable or unlikely that any employee, such as Johnson would continue working for an
employer who does not pay him his salaries. Applying the Court’s pronouncement in Duldulao v. CA , the Court
35

construes that the act of the petitioners in not paying Johnson his salaries for three months has become unbearable
on the latter’s part that he had no choice but to cede his employment with them. The Court quotes the pertinent
sections of Johnson’s resignation letter which reflects the real reason why he was resigning as operations manager
of the hotel:

I hereby tender my resignation to you, Mr[.] Wes Prentice, Dreamland Resort, Subic, Zambales, Philippines.

Since joining Dreamland Resort & Hotel over three months ago I have put my heart and soul into the business. I
have donated many hours of my personal time. I have frequently worked seven days a week and twelve to thirteen
hours a day. I am now literally penniless, due totally to the fact that I have lent you and your resort/hotel well over
$200,000AU (approx 8million pesos) and your non-payment of wages to me from 1st August 2007 as per
Employment Agreement. x x x.  (Emphasis and underscoring ours)
36

Labor II – 1
The above preceding statement only goes to show that while it was Johnson who tendered his resignation, it was
due to the petitioners’ acts that he was constrained to resign. The petitioners cannot expect Johnson to tolerate
working for them without any compensation.

Since Johnson was constructively dismissed, he was illegally dismissed. As to the reliefs granted to an employee
who is illegally dismissed, Golden Ace Builders v. Talde  referring to Macasero v. Southern Industrial Gases
37

Philippines  is instructive:

38

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs
provided are separate and distinct. In instances where reinstatement is no longer feasible because of strained
relations between the employee and the employer, separation pay is granted. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no longer viable, and
backwages.

The normal consequences of respondents’ illegal dismissal, then, are reinstatement without loss of seniority rights,
and payment of backwages computed from the time compensation was withheld up to the date of actual
reinstatement. Where reinstatement is no longer viable as an option, separation pay equivalent to one (1) month
salary for every year of service should be awarded as an alternative. The payment of separation pay is in addition to
payment of backwages.  (Emphasis and underscoring supplied)
39

The case of Golden Ace further provides:

"The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no longer
practical or in the best interest of the parties. Separation pay in lieu of reinstatement may likewise be awarded if the
employee decides not to be reinstated." x x x

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. On one hand, such payment liberates the
employee from what could be a highly oppressive work environment.  On the other hand, it releases the employer
1âwphi1

from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust. 40

In the present case, the NLRC found that due to the strained relations between the parties, separation pay is to be
awarded to Johnson in lieu of his reinstatement.

The NLRC held that Johnson is entitled to backwages from November 3, 2007 up to the finality of the decision;
separation pay equivalent to one month salary; and unpaid salaries from August 1, 2007 to November 1, 2007
amounting to a total of ₱172,800.00. 41

While the Court agrees with the NLRC that the award of separation pay and unpaid salaries is warranted, the Court
does not lose sight of the fact that the employment contract states that Johnson's employment is for a term of three
years.

Accordingly, the award of backwages should be computed from November 3, 2007 to August 1, 2010 - which is
three years from August 1, 2007. Furthermore, separation pay is computed from the commencement of employment
up to the time of termination, including the imputed service for which the employee is entitled to backwages.  As
42

one-month salary is awarded as separation pay for every year of service, including imputed service, Johnson should
be paid separation pay equivalent to his three-month salary for the three-year contract.

WHEREFORE, the Resolutions dated December 14, 2009 and February 11, 2010 of the Court of Appeals in CA-
G.R. SP No. 111693 are hereby SET ASIDE. The Decision of the NLRC dated April 30, 2009 in NLRC LAC No. 07-
002711-08 is REINSTATED and AFFIRMED with MODIFICATIONS in the computation of backwages and
separation pay. Dreamland Hotel Resort and Westley Prentice are ORDERED to PAY Stephen Johnson backwages
of ₱60,000.00 per month which should be computed from November 3, 2007 to August 1, 2010 less the P.7,200.00
already paid to him. Likewise, separation pay of ₱180.000.00, representing Stephen Johnson's three-year contract
should be awarded.

Labor II – 1
Labor II – 1
 45.) G.R. No. 189851, June 22, 2016

INTEC CEBU INC., AKIHIKO KAMBAYASHI AND WATARU SATO, Petitioners, v. HON. COURT

OF APPEALS, ROWENA REYES, ROWENA ODIONG, HYDEE AYUDA, TERESITA BERIDO,
CRISTINA LABAPIZ, GEMMA JUMAO-AS, SIGMARINGA BAROLO, LIGAYA B. ANADON,
DONALINE DELA TORRE, JOY P. LOMOD, JACQUELINE A. FLORES, SUSAN T. ALIÑO, ANALYN
P. ABALLE, CAROLINE A. LABATOS, LENITH F. ROMANO, LEONILA B. FLORES, CECILIA G.
PAPELLERO, AGNES C. CASIO, VIOLETA O. MATCHETE, CANDIDA I. CRUJIDO, CLAUDIA B.
CUTAMORA, ROSALIE R. POLICIOS, GENELYN C. MUÑEZ, ALOME MIGUE, ELSIE ALCOS,
LYDIALYN B. GODINEZ AND MYRNA S. LOGAOS, Respondents.

DECISION

PEREZ, J.:

For our resolution is this Petition for Certiorari under Rule 65 of the Rules of Court assailing the
Decision1 dated 22 April 2009 and Resolution2 dated 31 July 2009 of the Court of Appeals in CA-G.R.
SP No. 03471. The challenged decision reversed the judgment3 of the National Labor Relations
Commission (NLRC) and reinstatement of the Decision4 of the Labor Arbiter. The Labor Arbiter ruled
that respondent employees were constructively dismissed.

As culled from the records of the case, the following antecedent facts appear:

Petitioner Intec Cebu Inc. (Intec) is engaged in the manufacture and assembly of mechanical
chanRoblesvirtualLawlibrary

system and printed circuit board for cassette tape recorder, CD and CD ROM player while the
following respondents were hired by Intec in 1997 and 1998, respectively, as production workers: ChanRoblesVirtualawlibrary

1. Rowena Reyes

2. Rowena R. Odiong

3. Hydee P. Ayuda

4. Teresita C. Berido

5. Cristina S. Labapiz

6. Gemma T. Jumao-as

7. Sigmaringa B. Barolo

8. Ligaya B. Anadon

9. Donaline dela Torre

10.Joy P. Lomod

11.Jacqueline A. Flores

12.Susan T. Alino

13.Analyn P. Aballe

14.Caroline A. Labatos

Labor II – 1
 15.Lenith F. Romano

16.Leonila B. Flores

17.Cecilia G. Papellero

18.Agnes C. Casio

19.Violeta O. Matchete
         
20.Candida I. Crujido
          
21.Claudia B. Cutamora
         
22.Rosalie R. Policios
       
23.Genelyn C. Muñez
        
24.Alome Migue,
       
25.Elsie Alcos
        
26.Lydialyn B. Godinez

27.Myrna S. Logaos

28.Jenife Espinosa

29.Maria Fe Tomo

30.Jocelyn Casiban

31.Ailyn Bagyao

32.Josephine Casino

33.Pilar Batajoy

34.Juliet Teofilo

35.Cheryl Sugarol

36.Rechel Daitol

37.Janette Quidong5

Respondents alleged that in 2005, their working days were reduced from 6 to 2-4 days. Intec
apparently explained that reduction in working days was due to lack of job orders. However,
respondents discovered that Intec hired around 188 contractual employees tasked to perform tasks
which respondents were regularly doing. On 17 May 2006, private respondents claimed that they
were effectively terminated from employment as shown in the Establishment Termination
Report6 submitted to the Department of Labor and Employment (DOLE). Two (2) days later,
respondents filed a complaint for illegal dismissal.

Intec, for its part, claimed that the company was established to supply the required materials of
Kenwood Precision Corporation (Kenwood). When Kenwood stopped its operations in the Philippines,
Labor II – 1
Intec's business operations were severely affected, prompting Intec to set up a new product line
exclusively for Pentax Cebu Phils. Corporation (Pentax). In December 2005, Intec's job orders from
Pentax declined. On 4 January 2006, a memorandum was issued informing the employees that the
working days would be reduced to 3-4 days from the normal 6 day-work week. The reduced work
week policy was extended from April to June 2006. A corresponding memorandum was issued and a
copy thereof was submitted to the DOLE.

On 17 May 2007, Labor Arbiter Jermelina Pasignajen Ay-ad declared that respondents were illegally
dismissed and adjudged Intec and its officials liable for payment of separation pay and backwages.
Labor Arbiter Ay-ad found that Intec hired casual employees to replace respondents. As regards the
other monetary claims of respondents, Labor Arbiter Ay-ad ruled that Intec was able to prove, by
presenting copies of the payroll, that private respondents were properly paid. The dispositive portion
of the Labor Arbiter's Decision reads: ChanRoblesVirtualawlibrary

WHEREFORE, judgment is hereby rendered declaring complainants to have been illegally

(constructively) dismissed from their employment. Consequently, the respondents INTEC CEBU,
INC., WATARU SATO AND AKIHIRO KAMBAYASHI, are hereby directed to PAY jointly and
severally the following complainants of the amounts indicated opposite their names as appearing in
the attached Computation sheet consisting of two (2) pages, in concept of separation pay and
backwages in the total amount of SIX MILLION NINE HUNDRED SIXTY-SEVEN THOUSAND
NINE HUNDRED TWENTY-FOUR PESOS (P6,967,924.00), in cash or in check payable to NLRC-
RAB VII, Cebu City, through the Cashier of this Arbitration Branch within ten (10) days from receipt
of this Decision.

All other claims are DISMISSED for insufficiency of evidence and for lack of jurisdiction. The claims
and the case against respondents Feliciana Tero and Cheryl Inso are DISMISSED for lack of
merit.7chanroblesvirtuallawlibrary

On 14 December 2007, the NLRC set aside the Decision of the Labor Arbiter and held that Intec
suffered tremendous financial losses which justified the reduction of working days. The dispositive
portion of the decision reads: ChanRoblesVirtualawlibrary

WHEREFORE, the assailed decision is SET ASIDE and a new one entered declaring that complainants
were not dismissed either actually or constructively. Considering, however, all attendant factors as
discussed, respondent Intec Cebu, Inc. is hereby directed to give all thirty-seven (37) complainants
their respective separation pay based on one-half month salary per year of service, or the grand total
amount of ONE MILLION ONE HUNDRED TWENTY-FIVE THOUSAND SEVEN HUNDRED THIRTY-FIVE
PESOS (P1,125,735.00) as earlier computed per assailed decision.

Complainants are NOT entitled to backwages.8 chanroblesvirtuallawlibrary

Intec elevated the matter to the Court of Appeals. In a Decision dated 22 April 2009, the Court of
Appeals reversed the NLRC and reinstated the Decision of the Labor Arbiter with respect to
respondents herein. As for Jenife Espinosa, Maria Fe Tomo, Jocelyn Casiban, Ailyn Bagyao, Josephine
Casino, Pilar Batajoy, Juliet Teofilo, Cheryl Sugarol, Rechel Daitol and Janette Quidong, the case was
dismissed for their failure to sign the verification of certification of non-forum shopping in their
petition.

The instant petition is one for certiorari with Intec attributing grave abuse of discretion on the part of
the Court of Appeals for the following acts: ChanRoblesVirtualawlibrary

FIRST: BY OVERTURNING ITS OWN RESOLUTION DISMISSING OUTRIGHT THE PRIVATE

RESPONDENTS' PETITION FOR CERTIORARI, AND THEREBY GIVING DUE COURSE TO THEIR MOTION
FOR RECONSIDERATION, WITH THE MANIFEST ADVANCE PRONOUNCEMENT THAT THE SAID
MOTION WOULD EVENTUALLY BE GRANTED.

SECOND: BY DISREGARDING THE FACTUAL FINDINGS OF THE HONORABLE NATIONAL LABOR

RELATIONS COMMISSION, 4th DIVISION, CEBU CITY, THAT THE PRIVATE RESPONDENTS "WERE NOT
DISMISSED EITHER ACTUALLY OR CONSTRUCTIVELY."

Labor II – 1
THIRD: BY CAPRICIOUSLY ASSERTING THAT THE FINANCIAL STATEMENTS OF THE PETITIONERS
ARE SELF-SERVING AND OF DOUBTFUL VERACITY AS THEY WERE NOT PREPARED BY AN
INDEPENDENT AUDITOR, WHICH ASSERTION IS IN EFFECT AN ASSAULT UPON THE INTEGRITY AND
HONESTY OF THE AUDITOR.

FOURTH: BY CIRCUMVENTING THE DOCTRINE LAID DOWN BY THIS HONORABLE COURT IN THE
CASE OF "JARDINE DAVIS, INC. vs. THE NLRC, ET AL.", G.R. 26272, JULY 28, 1999, THAT RESORT
TO JUDICIAL REVIEW OF THE DECISION OF THE NLRC BY WAY OF SPECIAL CIVIL ACTION FOR
CERTIORARI UNDER RULE 65 OF THE RULES OF COURT IS CONFINED ONLY TO ISSUES OF WANT OF
JURISDICTION AND GRAVE ABUSE OF DISCRETION ON THE PART OF THE LABOR
TRIBUNAL, BARRING AN INQUIRY AS TO THE CORRECTNESS OF THE EVALUATION OF
EVIDENCE WHICH HAS THE BASIS OF LABOR AGENCY IN REACHING A CONCLUSION;

FIFTH: ASSUMING, WITHOUT HOWEVER ADMITTING, THAT THE PRIVATE RESPONDENTS ARE

ENTITLED TO SEPARATION PAY AND BACKWAGES, AS DETERMINED BY THE LABOR ARBITER, THE
COMPUTATION OF BENEFITS RECEIVEABLE - WHICH CONTAINS GLARING SERIOUS ERROR, IF
REINSTATED, AS THE COURT OF APPEALS, 18th DIVISION, WANTED IT TO BE.9 chanroblesvirtuallawlibrary

Intec claims that the reduction of the number of working days was undertaken to forestall business
losses as proven by the audited financial statements of Intec for the years 2001-2006. Intec insists
that the workers they employed from TESDA and Sisters of Mary were on-the-job trainees and they
were already employed prior to the implementation of the reduced working days policy of the
company. Moreover, Intec stresses that these workers were retained to enable the company to
comply with the urgent off-and-on job orders of Pentax which could not be accomplished by the
regular employees.

Intec reiterates that respondents voluntarily resigned or abandoned their work when they filed their
application for leave following the issuance of the second memorandum extending the
implementation of the reduced number of working days. According to Intec, respondents had
categorically declared that they would no longer report for work.

Respondents urge this Court to affirm the findings of the Labor Arbiter and the Court of Appeals that
they were constructively dismissed. Respondents refutes Intec's claim that it is suffering from
business reverses when it just hired additional workers from TESDA and Sisters of Mary despite the
fact that respondents were under reduced work days.

The charge of constructive dismissal is predicated on the claim that the implementation of the
reduced work week is illegal.

The Court has held that management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working methods, time,
place, and manner of work, processes to be followed, supervision of workers, working regulations,
transfer of employees, work supervision, lay-off of workers, and discipline, dismissal and recall of
workers. The exercise of management prerogative, however, is not absolute as it must be exercised
in good faith and with due regard to the rights of labor.10
chanrobleslaw

Thus, it was incumbent upon Intec to prove that that the implementation of the reduced working
days is valid and done in good faith. Intec claims that it implemented a reduction of work days
scheme to forestall its losses.

Two memoranda were allegedly sent to the affected employees informing them of the reduction of
work days. The first memorandum was dated 4 January 2006 and submitted to the DOLE only on 9
January 2006. In 2006, there was no specific rule or guideline covering the reduction of workdays. It
was only in January 2009 where the DOLE issued Department Advisory No. 2, Series of 2009 which
requires the employer to notify DOLE of the reduction of work days prior to its implementation. If the
reportorial requirement in retrenchment under Article 283 is to be followed, the DOLE should be
Labor II – 1
notified at least one month prior to the intended date of retrenchment. Be that as it may, Intec
submitted its report after the reduction of workdays was implemented. Moreover, there is nothing on
the records which show that a second notice was sent to the employees informing them of the
extension of the reduced work days to June 2006.

Intec presented its financial statements from the years 2001-2006 to prove that the company was
suffering from financial losses owing to the decline of its job orders. The summary of Intec's net
income/loss for the years 2001-2006 is illustrated below:ChanRoblesVirtualawlibrary

SUMMARY OF INTEC'S NET INCOME (LOSS) 31 APRIL 2001-2006

Net Income Net Loss Totals

April 30, 2001 (9,708,820.00) (9,708,820.00)
April 30, 2002 (5,928,636.00) (5,928,636.00)
April 30, 2003 4,669,180.00 4,669,180.00
April 30, 2004 4,726,326.00 4,726,326.00
April 30, 2005 (9,240,929.00) (9,240,929.00)
April 30, 2006 9,568,674.00 9,568,674.00
TOTAL 18,964,180.00 (24,878,385.00) (5,914,205.00)11
An examination of Intec's financial statements for 2005-2006 shows that while Intec suffered a net
loss of P9,240,929.00 in 2005, it earned a net income of P9,568,674.00 in 2006. The period covered
in the financial statement of 2006 is from May 2005-April 2006. It was only on the 9th month of
operation did Intec decide to carry out the reduced work day scheme. Note that the reduced work
day scheme was implemented only in January 2006. Unless evidence is shown by the company that
the income for 2006 was earned only between the months of January to April, it is safe to presume
that at the time the reduced work day scheme was being implemented, the company was still
benefiting from its gains as shown in the numbers for 2006.

Furthermore, the loss incurred in 2005 may be attributed to the acquisition of property and
equipment amounting to P9,218,967.0012 in 2005. There is also no indication in the financial
statements, much less an observation made by the independent auditor, that a reduction in demand
would necessitate a reduction in the employees' work days.

We cannot give weight to the evidence presented by Intec to prove the slump in demand. First, the
two-page delivery data are lacking in specifics. The report did not indicate when it was prepared.
Second, the report was prepared by Intec employees and approved by their President. Third, the
report appeared to be mere projections because it was not supported by corresponding sales or
delivery receipts. The actual sales may vary from the projected demand, thus, the report cannot be
made as basis of a slump in demand or a slow-down.

In addition, the hiring of 188 workers, whether they be trainees or casual employees, necessarily
incurred cost to the company. No proof was submitted that these newly-hired employees were
performing work different from the regular workers.

In sum, there is no reason to implement a cost-cutting measure in the form of reducing the
employees' working days.

Intec committed illegal reduction of work hours. Constructive dismissal occurs when there is
cessation of work because continued employment is rendered impossible, unreasonable or unlikely;
Labor II – 1
when there is a demotion in rank or diminution in pay or both; or when a clear discrimination,
insensibility, or disdain by an employer becomes unbearable to the employee.13 chanrobleslaw

Intec's unilateral and arbitrary reduction of the work day scheme had significantly greatly
reduced respondents' salaries thereby rendering it liable for constructive dismissal.

There is no merit to Intec's charge of abandonment against respondents. To constitute abandonment,

there must be clear proof of deliberate and unjustified intent to sever the employer-employee
relationship. Clearly, the operative act is still the employee's ultimate act of putting an end to his
employment. Furthermore, it is a settled doctrine that the filing of a complaint for illegal dismissal is
inconsistent with abandonment of employment. An employee who takes steps to protest his dismissal
cannot logically be said to have abandoned his work. The filing of such complaint is proof enough of
his desire to return to work, thus negating any suggestion of abandonment.14 chanrobleslaw

We affirm the Court of Appeals' finding that there is no proof that respondents committed
unauthorized absences or had otherwise refused to work. The complaint for constructive dismissal is
the best evidence against abandonment because the filing of a complaint for illegal dismissal is
incompatible to abandonment.

Lastly, we note that Intec availed of the wrong mode of appeal. For certiorari to prosper, the
following requisites must concur: (1) the writ is directed against a tribunal, a board or any officer
exercising judicial or quasi-judicial functions; (2) such tribunal, board or officer has acted without or
in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction;
and (3) there is no appeal or any plain, speedy and adequate remedy in the ordinary course of
law.15chanrobleslaw

Well-settled is the rule that a petition for certiorari against a court which has jurisdiction over a case
will prosper only if grave abuse of discretion is manifested. The burden is on the part of the petitioner
to prove not merely reversible error, but grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of the public respondent issuing the impugned order. Mere abuse of discretion
is not enough; it must be grave. The term grave abuse of discretion is defined as a capricious and
whimsical exercise of judgment so patent and gross as to amount to an evasion of a positive duty or
a virtual refusal to perform a duty enjoined by law, as where the power is exercised in an arbitrary
and despotic manner because of passion or hostility.16 chanrobleslaw

A writ of certiorari will not issue where the remedy of appeal is available to the aggrieved party.17 In
this case, appeal under Rule 45 of the Rules of Court was clearly available to Intec.

Finding no grave abuse of discretion in this case, the certiorari petition should be dismissed.

WHEREFORE, the instant petition is DISMISSED and the Decision dated 22 April 2009 and
Resolution dated 31 July 2009 of the Court of Appeals in CA-G.R. SP No. 03471 are AFFIRMED.

Labor II – 1
 46.) [G.R. NO. 170287 : February 14, 2008]

ALABANG COUNTRY CLUB, INC., Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION,

ALABANG COUNTRY CLUB INDEPENDENT EMPLOYEES UNION, CHRISTOPHER PIZARRO,
MICHAEL BRAZA, and NOLASCO CASTUERAS, Respondents.

DECISION

VELASCO, JR., J.:

Petitioner Alabang Country Club, Inc. (Club) is a domestic non-profit corporation with principal office
at Country Club Drive, Ayala Alabang, Muntinlupa City. Respondent Alabang Country Club
Independent Employees Union (Union) is the exclusive bargaining agent of the Club's rank-and-file
employees. In April 1996, respondents Christopher Pizarro, Michael Braza, and Nolasco Castueras
were elected Union President, Vice-President, and Treasurer, respectively.

On June 21, 1999, the Club and the Union entered into a Collective Bargaining Agreement (CBA),
which provided for a Union shop and maintenance of membership shop.

The pertinent parts of the CBA included in Article II on Union Security read, as follows:

ARTICLE II

UNION SECURITY

SECTION 1. CONDITION OF EMPLOYMENT. All regular rank-and-file employees, who are members or
subsequently become members of the UNION shall maintain their membership in good standing as a
condition for their continued employment by the CLUB during the lifetime of this Agreement or any
extension thereof.

SECTION 2. [COMPULSORY] UNION MEMBERSHIP FOR NEW REGULAR RANK-AND-FILE EMPLOYEES

a) New regular rank-and-file employees of the Club shall join the UNION within five (5) days from the
date of their appointment as regular employees as a condition for their continued employment during
the lifetime of this Agreement, otherwise, their failure to do so shall be a ground for dismissal from
the CLUB upon demand by the UNION.

b) The Club agrees to furnish the UNION the names of all new probationary and regular employees
covered by this Agreement not later than three (3) days from the date of regular appointment
showing the positions and dates of hiring.

xxx

SECTION 4. TERMINATION UPON UNION DEMAND. Upon written demand of the UNION and after
observing due process, the Club shall dismiss a regular rank-and-file employee on any of the
following grounds:

(a) Failure to join the UNION within five (5) days from the time of regularization;

(b) Resignation from the UNION, except within the period allowed by law;

(c) Conviction of a crime involving moral turpitude;

Labor II – 1
(d) Non-payment of UNION dues, fees, and assessments;

(e) Joining another UNION except within the period allowed by law;

(f) Malversation of union funds;

(g) Actively campaigning to discourage membership in the UNION; and cralawlibrary

(h) Inflicting harm or injury to any member or officer of the UNION.

It is understood that the UNION shall hold the CLUB free and harmless [sic] from any liability or
damage whatsoever which may be imposed upon it by any competent judicial or quasi-judicial
authority as a result of such dismissal and the UNION shall reimburse the CLUB for any and all
liability or damage it may be adjudged.1 (Emphasis supplied.)

Subsequently, in July 2001, an election was held and a new set of officers was elected. Soon
thereafter, the new officers conducted an audit of the Union funds. They discovered some irregularly
recorded entries, unaccounted expenses and disbursements, and uncollected loans from the Union
funds. The Union notified respondents Pizarro, Braza, and Castueras of the audit results and asked
them to explain the discrepancies in writing.2

Thereafter, on October 6, 2001, in a meeting called by the Union, respondents Pizarro, Braza, and
Castueras explained their side. Braza denied any wrongdoing and instead asked that the
investigation be addressed to Castueras, who was the Union Treasurer at that time. With regard to
his unpaid loans, Braza claimed he had been paying through monthly salary deductions and said the
Union could continue to deduct from his salary until full payment of his loans, provided he would be
reimbursed should the result of the initial audit be proven wrong by a licensed auditor. With regard to
the Union expenses which were without receipts, Braza explained that these were legitimate
expenses for which receipts were not issued, e.g. transportation fares, food purchases from small
eateries, and food and transportation allowances given to Union members with pending complaints
with the Department of Labor and Employment, the National Labor Relations Commission (NLRC),
and the fiscal's office. He explained that though there were no receipts for these expenses, these
were supported by vouchers and itemized as expenses. Regarding his unpaid and unliquidated cash
advances amounting to almost PhP 20,000, Braza explained that these were not actual cash
advances but payments to a certain Ricardo Ricafrente who had loaned PhP 200,000 to the Union.3

Pizarro, for his part, blamed Castueras for his unpaid and uncollected loan and cash advances. He
claimed his salaries were regularly deducted to pay his loan and he did not know why these remained
unpaid in the records. Nonetheless, he likewise agreed to continuous salary deductions until all his
accountabilities were paid.4

Castueras also denied any wrongdoing and claimed that the irregular entries in the records were
unintentional and were due to inadvertence because of his voluminous work load. He offered that his
unpaid personal loan of PhP 27,500 also be deducted from his salary until the loans were fully paid.
Without admitting any fault on his part, Castueras suggested that his salary be deducted until the
unaccounted difference between the loans and the amount collected amounting to a total of PhP
22,000 is paid.5

Despite their explanations, respondents Pizarro, Braza, and Castueras were expelled from the Union,
and, on October 16, 2001, were furnished individual letters of expulsion for malversation of Union
funds.6 Attached to the letters were copies of the Panawagan ng mga Opisyales ng Unyon signed by
37 out of 63 Union members and officers, and a Board of Directors' Resolution7 expelling them from
the Union.

Labor II – 1
In a letter dated October 18, 2001, the Union, invoking the Security Clause of the CBA, demanded
that the Club dismiss respondents Pizarro, Braza, and Castueras in view of their expulsion from the
Union.8 The Club required the three respondents to show cause in writing within 48 hours from notice
why they should not be dismissed. Pizarro and Castueras submitted their respective written
explanations on October 20, 2001, while Braza submitted his explanation the following day.

During the last week of October 2001, the Club's general manager called respondents Pizarro, Braza,
and Castueras for an informal conference inquiring about the charges against them. Said respondents
gave their explanation and asserted that the Union funds allegedly malversed by them were even
over the total amount collected during their tenure as Union officers-PhP 120,000 for Braza, PhP
57,000 for Castueras, and PhP 10,840 for Pizarro, as against the total collection from April 1996 to
December 2001 of only PhP 102,000. They claimed the charges are baseless. The general manager
announced he would conduct a formal investigation.

Nonetheless, after weighing the verbal and written explanations of the three respondents, the Club
concluded that said respondents failed to refute the validity of their expulsion from the Union. Thus,
it was constrained to terminate the employment of said respondents. On December 26, 2001, said
respondents received their notices of termination from the Club.9

Respondents Pizarro, Braza, and Castueras challenged their dismissal from the Club in an illegal
dismissal complaint docketed as NLRC-NCR Case No. 30-01-00130-02 filed with the NLRC, National
Capital Region Arbitration Branch. In his January 27, 2003 Decision,10 the Labor Arbiter ruled in favor
of the Club, and found that there was justifiable cause in terminating said respondents. He dismissed
the complaint for lack of merit.

On February 21, 2003, respondents Pizarro, Braza, and Castueras filed an Appeal docketed as NLRC
NCR CA No. 034601-03 with the NLRC.

On February 26, 2004, the NLRC rendered a Decision11 granting the appeal, the fallo of which reads:

WHEREFORE, finding merit in the Appeal, judgment is hereby rendered declaring the dismissal of the
complainants illegal. x x x Alabang Country Club, Inc. and Alabang Country Club Independent Union
are hereby ordered to reinstate complainants Christopher Pizarro, Nolasco Castueras and Michael
Braza to their former positions without loss of seniority rights and other privileges with full
backwages from the time they were dismissed up to their actual reinstatement.

SO ORDERED.

The NLRC ruled that there was no justifiable cause for the termination of respondents Pizarro, Braza,
and Castueras. The commissioners relied heavily on Section 2, Rule XVIII of the Rules Implementing
Book V of the Labor Code. Sec. 2 provides:

SEC. 2. Actions arising from Article 241 of the Code. - Any action arising from the administration or
accounting of union funds shall be filed and disposed of as an intra-union dispute in accordance with
Rule XIV of this Book.

In case of violation, the Regional or Bureau Director shall order the responsible officer to render an
accounting of funds before the general membership and may, where circumstances warrant, mete
the appropriate penalty to the erring officer/s, including suspension or expulsion from the union.12

According to the NLRC, said respondents' expulsion from the Union was illegal since the DOLE had
not yet made any definitive ruling on their liability regarding the administration of the Union's funds.

Labor II – 1
The Club then filed a motion for reconsideration which the NLRC denied in its June 20, 2004
Resolution.13

Aggrieved by the Decision and Resolution of the NLRC, the Club filed a Petition for Certiorari which
was docketed as CA-G.R. SP No. 86171 with the Court of Appeals (CA).

The CA Upheld the NLRC Ruling

that the Three Respondents were Deprived Due Process

On July 5, 2005, the appellate court rendered a Decision,14 denying the petition and upholding the
Decision of the NLRC. The CA's Decision focused mainly on the Club's perceived failure to afford due
process to the three respondents. It found that said respondents were not given the opportunity to
be heard in a separate hearing as required by Sec. 2(b), Rule XXIII, Book V of the Omnibus Rules
Implementing the Labor Code, as follows:

SEC. 2. Standards of due process; requirements of notice.-In all cases of termination of

employment, the following standards of due process shall be substantially observed:

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

xxx

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

The CA also said the dismissal of the three respondents was contrary to the doctrine laid down
in Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos  (Malayang Samahan), where
this Court ruled that even on the assumption that the union had valid grounds to expel the local
union officers, due process requires that the union officers be accorded a separate hearing by the
employer company.15

In a Resolution16 dated October 20, 2005, the CA denied the Club's motion for reconsideration.

The Club now comes before this Court with these issues for our resolution, summarized as follows:

1. Whether there was just cause to dismiss private respondents, and whether they were
afforded due process in accordance with the standards provided for by the Labor Code and
its Implementing Rules.

2. Whether or not the CA erred in not finding that the NLRC committed grave abuse of discretion
amounting to lack or excess of jurisdiction when it ruled that respondents Pizarro, Braza, and
Castueras were illegally expelled from the Union.

3. Whether the case of Agabon v. NLRC17 should be applied to this case.

4. Whether that in the absence of bad faith and malice on the part of the Club, the Union is solely
liable for the termination from employment of said respondents.

The main issue is whether the three respondents were illegally dismissed and whether they were
afforded due process.

Labor II – 1
The Club avers that the dismissal of the three respondents was in accordance with the Union security
provisions in their CBA. The Club also claims that the three respondents were afforded due process,
since the Club conducted an investigation separate and independent from that conducted by the
Union.

Respondents Pizarro, Braza, and Castueras, on the other hand, contend that the Club failed to
conduct a separate hearing as prescribed by Sec. 2(b), Rule XXIII, Book V of the implementing rules
of the Code.

First, we resolve the legality of the three respondents' dismissal from the Club.

Valid Grounds for Termination

Under the Labor Code, an employee may be validly terminated on the following grounds: (1) just
causes under Art. 282; (2) authorized causes under Art. 283; (3) termination due to disease under
Art. 284; and (4) termination by the employee or resignation under Art. 285.

Another cause for termination is dismissal from employment due to the enforcement of the
union security clause in the CBA. Here, Art. II of the CBA on Union security contains the
provisions on the Union shop and maintenance of membership shop. There is union shop when all
new regular employees are required to join the union within a certain period as a condition for their
continued employment. There is maintenance of membership shop when employees who are union
members as of the effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition for continued employment until they are promoted or
transferred out of the bargaining unit or the agreement is terminated.18 Termination of employment
by virtue of a union security clause embodied in a CBA is recognized and accepted in our
jurisdiction.19 This practice strengthens the union and prevents disunity in the bargaining unit within
the duration of the CBA. By preventing member disaffiliation with the threat of expulsion from the
union and the consequent termination of employment, the authorized bargaining representative
gains more numbers and strengthens its position as against other unions which may want to claim
majority representation.

In terminating the employment of an employee by enforcing the union security clause, the
employer needs only to determine and prove that: (1) the union security clause is
applicable; (2) the union is requesting for the enforcement of the union security provision
in the CBA; and (3) there is sufficient evidence to support the union's decision to expel the
employee from the union. These requisites constitute just cause for terminating an
employee based on the CBA's union security provision.

The language of Art. II of the CBA that the Union members must maintain their membership in good
standing as a condition sine qua non for their continued employment with the Club is unequivocal. It
is also clear that upon demand by the Union and after due process, the Club shall terminate the
employment of a regular rank-and-file employee who may be found liable for a number of offenses,
one of which is malversation of Union funds.20

Below is the letter sent to respondents Pizarro, Braza, and Castueras, informing them of their
termination:

On October 18, 2001, the Club received a letter from the Board of Directors of the Alabang Country
Club Independent Employees' Union ("Union") demanding your dismissal from service by reason of
your alleged commission of act of dishonesty, specifically malversation of union funds. In support
thereof, the Club was furnished copies of the following documents:

Labor II – 1
1. A letter under the subject "Result of Audit" dated September 14, 2001 (receipt of which was duly
acknowledged from your end), which required you to explain in writing the charges against you (copy
attached);

2. The Union's Board of Directors' Resolution dated October 2, 2001, which explained that the Union
afforded you an opportunity to explain your side to the charges;

3. Minutes of the meeting of the Union's Board of Directors wherein an administrative investigation of
the case was conducted last October 6, 2001; and cralawlibrary

4. The Union's Board of Directors' Resolution dated October 15, 2001 which resolved your expulsion
from the Union for acts of dishonesty and malversation of union funds, which was duly approved by
the general membership.

After a careful evaluation of the evidence on hand vis - à-vis a thorough assessment of your defenses
presented in your letter-explanation dated October 6, 2001 of which you also expressed that you
waived your right to be present during the administrative investigation conducted by the Union's
Board of Directors on October 6, 2001, Management has reached the conclusion that there are
overwhelming reasons to consider that you have violated Section 4(f) of the CBA, particularly on
the grounds of malversation of union funds. The Club has determined that you were sufficiently
afforded due process under the circumstances.

Inasmuch as the Club is duty-bound to comply with its obligation under Section 4(f) of the CBA, it
is unfortunate that Management is left with no other recourse but to consider your termination from
service effective upon your receipt thereof. We wish to thank you for your services during your
employment with the Company. It would be more prudent that we just move on independently if only
to maintain industrial peace in the workplace.

Be guided accordingly.21

Gleaned from the above, the three respondents were expelled from and by the Union after due
investigation for acts of dishonesty and malversation of Union funds. In accordance with the CBA, the
Union properly requested the Club, through the October 18, 2001 letter22 signed by Mario Orense,
the Union President, and addressed to Cynthia Figueroa, the Club's HRD Manager, to enforce the
Union security provision in their CBA and terminate said respondents. Then, in compliance with the
Union's request, the Club reviewed the documents submitted by the Union, requested said
respondents to submit written explanations, and thereafter afforded them reasonable opportunity to
present their side. After it had determined that there was sufficient evidence that said respondents
malversed Union funds, the Club dismissed them from their employment conformably with Sec. 4(f)
of the CBA.

Considering the foregoing circumstances, we are constrained to rule that there is sufficient
cause for the three respondents' termination from employment.

Were respondents Pizarro, Braza, and Castueras accorded due process before their
employments were terminated? cralawred

We rule that the Club substantially complied with the due process requirements before it
dismissed the three respondents.

The three respondents aver that the Club violated their rights to due process as enunciated
in Malayang Samahan,23 when it failed to conduct an independent and separate hearing
before they were dismissed from service.

Labor II – 1
The CA, in dismissing the Club's petition and affirming the Decision of the NLRC, also relied on the
same case. We explained in Malayang Samahan:

x x x Although this Court has ruled that union security clauses embodied in the collective bargaining
agreement may be validly enforced and that dismissals pursuant thereto may likewise be valid, this
does not erode the fundamental requirements of due process. The reason behind the enforcement of
union security clauses which is the sanctity and inviolability of contracts cannot override one's right
to due process.24

In the above case, we pronounced that while the company, under a maintenance of membership
provision of the CBA, is bound to dismiss any employee expelled by the union for disloyalty upon its
written request, this undertaking should not be done hastily and summarily. The company acts in bad
faith in dismissing a worker without giving him the benefit of a hearing.25 We cautioned in the same
case that the power to dismiss is a normal prerogative of the employer; however, this power has a
limitation. The employer is bound to exercise caution in terminating the services of the employees
especially so when it is made upon the request of a labor union pursuant to the CBA. Dismissals must
not be arbitrary and capricious. Due process must be observed in dismissing employees because the
dismissal affects not only their positions but also their means of livelihood. Employers should respect
and protect the rights of their employees, which include the right to labor.26

The CA and the three respondents err in relying on Malayang Samahan, as its ruling has no
application to this case. In Malayang Samahan, the union members were expelled from the union and
were immediately dismissed from the company without any semblance of due process. Both the
union and the company did not conduct administrative hearings to give the employees a chance to
explain themselves. In the present case, the Club has substantially complied with due process. The
three respondents were notified that their dismissal was being requested by the Union, and their
explanations were heard. Then, the Club, through its President, conferred with said respondents
during the last week of October 2001. The three respondents were dismissed only after the Club
reviewed and considered the documents submitted by the Union vis - à-vis the written explanations
submitted by said respondents. Under these circumstances, we find that the Club had afforded the
three respondents a reasonable opportunity to be heard and defend themselves.

On the applicability of Agabon, the Club points out that the CA ruled that the three respondents were
illegally dismissed primarily because they were not afforded due process. We are not unaware of the
doctrine enunciated in Agabon that when there is just cause for the dismissal of an employee, the
lack of statutory due process should not nullify the dismissal, or render it illegal or ineffectual, and
the employer should indemnify the employee for the violation of his statutory rights.27 However, we
find that we could not apply Agabon to this case as we have found that the three respondents were
validly dismissed and were actually afforded due process.

Finally, the issue that since there was no bad faith on the part of the Club, the Union is solely liable
for the termination from employment of the three respondents, has been mooted by our finding that
their dismissal is valid.

WHEREFORE, premises considered, the Decision dated July 5, 2005 of the CA and the Decision
dated February 26, 2004 of the NLRC are hereby REVERSED and SET ASIDE. The Decision dated
January 27, 2003 of the Labor Arbiter in NLRC-NCR Case No. 30-01-00130-02 is
hereby REINSTATED.

Labor II – 1
 47.) [G.R. NO. 165407 : June 5, 2009]

HERMINIGILDO INGUILLO and ZENAIDA BERGANTE, Petitioners, v. FIRST PHILIPPINE

SCALES, Inc. and/or AMPARO POLICARPIO, Manager, Respondents.

DECISION

PERALTA, J.:

Assailed in this Petition for Review under Rule 45 of the Rules of Court are the Court of Appeals (1)
Decision1 dated March 11, 2004 in CA-G.R. SP No. 73992, which dismissed the Petition
for Certiorari  of petitioners Zenaida Bergante (Bergante) and Herminigildo Inguillo (Inguillo); and (2)
Resolution2 dated September 17, 2004 denying petitioners' Motion for Reconsideration. The appellate
court sustained the ruling of the National Labor Relations Commission (NLRC) that petitioners were
validly dismissed pursuant to a Union Security Clause in the collective bargaining agreement.

The facts of the case are as follows:

First Philippine Scales, Inc. (FPSI), a domestic corporation engaged in the manufacturing of weighing
scales, employed Bergante and Inguillo as assemblers on August 15, 1977 and September 10, 1986,
respectively.

In 1991, FPSI and First Philippine Scales Industries Labor Union (FPSILU)3 entered into a Collective
Bargaining Agreement (CBA),4 the duration of which was for a period of five (5) years starting on
September 12, 1991 until September 12, 1996. On September 19, 1991, the members of FPSILU
ratified the CBA in a document entitled RATIPIKASYON NG KASUNDUAN.5 Bergante and Inguillo, who
were members of FPSILU, signed the said document.6

During the lifetime of the CBA, Bergante, Inguillo and several FPSI employees joined another union,
the Nagkakaisang Lakas ng Manggagawa (NLM), which was affiliated with a federation called
KATIPUNAN (NLM-KATIPUNAN, for brevity). Subsequently, NLM-KATIPUNAN filed with the
Department of Labor and Employment (DOLE) an intra-union dispute7 against FPSILU and FPSI. In
said case, the Med-Arbiter decided8 in favor of FPSILU. It also ordered the officers and members of
NLM-KATIPUNAN to return to FPSILU the amount of P90,000.00 pertaining to the union dues
erroneously collected from the employees. Upon finality of the Med-Arbiter's Decision, a Writ of
Execution9 was issued to collect the adjudged amount from NLM-KATIPUNAN. However, as no
amount was recovered, notices of garnishment were issued to United Coconut Planters Bank
(Kalookan City Branch)10 and to FPSI11 for the latter to hold for FPSILU the earnings of Domingo
Grutas, Jr. (Grutas) and Inguillo, formerly FPSILU's President and Secretary for Finance, respectively,
to the extent of P13,032.18. Resultantly, the amount of P5,140.55 was collected,12 P1,695.72 of
which came from the salary of Grutas, while the P3,444.83 came from that of Inguillo.

Meanwhile, on March 29, 1996, the executive board and members of the FPSILU addressed a
document dated March 18, 1996 denominated as "Petisyon"13 to FPSI's general manager, Amparo
Policarpio (Policarpio), seeking the termination of the services of the following employees, namely:
Grutas, Yolanda Tapang, Shirley Tapang, Gerry Trinidad, Gilbert Lucero, Inguillo, Bergante, and
Vicente Go, on the following grounds:14 (1) disloyalty to the Union by separating from it and
affiliating with a rival Union, the NLM-KATIPUNAN; (2) dereliction of duty by failing to call periodic
membership meetings and to give financial reports; (3) depositing Union funds in the names of
Grutas and former Vice-President Yolanda Tapang, instead of in the name of FPSILU, care of the
President; (4) causing damage to FPSI by deliberately slowing down production, preventing the
Union to even attempt to ask for an increase in benefits from the former; and (5) poisoning the
minds of the rest of the members of the Union so that they would be enticed to join the rival union.
Labor II – 1
On May 13, 1996, Inguillo filed with the NLRC a complaint against FPSI and/or Policarpio
(respondents) for illegal withholding of salary and damages, docketed as NLRC-NCR-Case No. 00-05-
03036-96.15

On May 16, 1996, respondents terminated the services of the employees mentioned in the
"Petisyon."

The following day, two (2) separate complaints for illegal dismissal, reinstatement and damages were
filed against respondents by: (1) NLM-KATIPUNAN, Grutas, Trinidad, Bergante, Yolanda Tapang, Go,
Shirley Tapang and Lucero16 (Grutas complaint, for brevity); and (2) Inguillo17 (Inguillo complaint).
Both complaints were consolidated with Inguillo's prior complaint for illegal withholding of salary,
which was pending before Labor Arbiter Manuel Manansala. After the preliminary mandatory
conference, some of the complainants agreed to amicably settle their cases. Consequently, the Labor
Arbiter issued an Order18 dated October 1, 1996, dismissing with prejudice the complaints of Go,
Shirley Tapang, Yolanda Tapang, Grutas, and Trinidad.19 Lucero also settled the case after receiving
his settlement money and executing a Quitclaim and Release in favor of FPSI and Policarpio.20

Bergante and Inguillo, the remaining complainants, were directed to submit their respective position
papers, after which their complaints were submitted for resolution on February 20, 1997.21

In their Position Paper,22 Bergante and Inguillo claimed that they were not aware of a petition seeking
for their termination, and neither were they informed of the grounds for their termination. They
argued that had they been informed, they would have impleaded FPSILU in their complaints. Inguillo
could not think of a valid reason for his dismissal except the fact that he was a very vocal and active
member of the NLM-KATIPUNAN. Bergante, for her part, surmised that she was dismissed solely for
being Inguillo's sister-in-law. She also reiterated the absence of a memorandum stating that she
committed an infraction of a company rule or regulation or a violation of law that would justify her
dismissal.ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

Inguillo also denounced respondents' act of withholding his salary, arguing that he was not a party to
the intra-union dispute from which the notice of garnishment arose. Even assuming that he was, he
argued that his salary was exempt from execution.

In their Position Paper,23 respondents maintained that Bergante and Inguillo's dismissal was justified,
as the same was done upon the demand of FPSILU, and that FPSI complied in order to avoid a
serious labor dispute among its officers and members, which, in turn, would seriously affect
production. They also justified that the dismissal was in accordance with the Union Security Clause in
the CBA, the existence and validity of which was not disputed by Bergante and Inguillo. In fact, the
two had affixed their signatures to the document which ratified the CBA.

In his Decision24 dated November 27, 1997, the Labor Arbiter dismissed the remaining complaints of
Bergante and Inguillo and held that they were not illegally dismissed. He explained that the two
clearly violated the Union Security Clause of the CBA when they joined NLM-KATIPUNAN and
committed acts detrimental to the interests of FPSILU and respondents. The dispositive portion of the
said Decision states:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring respondents First Philippines Scales, Inc. (First Philippine Scales Industries [FPSI] and
Amparo Policarpio, in her capacity as President and General Manager of respondent FPSI, not guilty
of illegal dismissal as above discussed. However, considering the length of services rendered by
complainants Herminigildo Inguillo and Zenaida Bergante as employees of respondent FPSI, plus the
fact that the other complainants in the above-entitled cases were previously granted financial
assistance/separation pay through amicable settlement, the afore-named respondents are hereby
Labor II – 1
directed to pay complainants Herminigildo Inguillo and Zenaida Bergante separation pay and accrued
legal holiday pay, as earlier computed, to wit:

Herminigildo Inguillo

Separation pay ................ P22,490.00

Legal Holiday Pay........... 839.00
Total 23,329.00

Zenaida Bergante

Separation pay................. P43,225.00

Legal Holiday Pay........... 839.00
Total 44,064.00

2. Directing the afore-named respondents to pay ten (10%) percent attorney's fees based on the
total monetary award to complainants Inguillo and Bergante.

3. Dismissing the claim for illegal withholding of salary of complainant Inguillo for lack of merit as
above discussed.

4. Dismissing the other money claims and/or other charges of complainants Inguillo and Bergante for
lack of factual and legal basis.

5. Dismissing the complaint of complainant Gilberto Lucero with prejudice for having executed a
Quitclaim and Release and voluntary resignation in favor of respondents FPSI and Amparo Policarpio
as above-discussed where the former received the amount of P23,334.00 as financial
assistance/separation pay and legal holiday pay from the latter.

SO ORDERED.25

Bergante and Inguillo appealed before the NLRC, which reversed the Labor Arbiter's Decision in a
Resolution26 dated June 8, 2001, the dispositive portion of which provides:

WHEREFORE, the assailed decision is set aside. Respondents are hereby ordered to reinstate
complainants Inguillo and Bergante with full backwages from the time of their dismissal up [to] their
actual reinstatement. Further, respondents are also directed to pay complainant Inguillo the amount
representing his withheld salary for the period March 15, 1998 to April 16, 1998. The sum
corresponding to ten percent (10%) of the total judgment award by way of attorney's fees is likewise
ordered. All other claims are ordered dismissed for lack of merit.

SO ORDERED.27

In reversing the Labor Arbiter, the NLRC28 ratiocinated that respondents failed to present evidence to
show that Bergante and Inguillo committed acts inimical to FPSILU's interest. It also observed that,
since the two (2) were not informed of their dismissal, the justification given by FPSI that it was
merely constrained to dismiss the employees due to persistent demand from the Union clearly proved
the claim of summary dismissal and violation of the employees' right to due process.

Respondents filed a Motion for Reconsideration, which was referred by the NLRC to Executive Labor
Arbiter Vito C. Bose for report and recommendation. In its Resolution29 dated August 26, 2002, the
NLRC adopted in toto the report and recommendation of Arbiter Bose which set aside its previous

Labor II – 1
Resolution reversing the Labor Arbiter's Decision. This time, the NLRC held that Bergante and Inguillo
were not illegally dismissed as respondents merely put in force the CBA provision on the termination
of the services of disaffiliating Union members upon the recommendation of the Union. The
dispositive portion of the said Resolution provides:

WHEREFORE, the resolution of the Commission dated June 8, 2001 is set aside. Declaring the
dismissal of the complainants as valid, [t]his complaint for illegal dismissal is dismissed. However,
respondents are hereby directed to pay complainant Inguillo the amount representing his withheld
salary for the period March 15, 1998 to April 16, 1998, plus ten (10%) percent as attorney's fees.

All other claims are ordered dismissed for lack of merit.

SO ORDERED.30

Not satisfied with the disposition of their complaints, Bergante and Inguillo filed a Petition
for Certiorari under Rule 65 of the Rules of Court with the Court of Appeals (CA). The CA dismissed
the petition for lack of merit31 and denied the subsequent motion for reconsideration.32 In affirming
the legality of the dismissal, the CA ratiocinated, thus:

x x x on the merits, we sustain the view adopted by the NLRC that:

x x x it cannot be said that the stipulation providing that the employer may dismiss an employee
whenever the union recommends his expulsion either for disloyalty or for any violation of its by-laws
and constitution is illegal or constitutive of unfair labor practice, for such is one of the matters on
which management and labor can agree in order to bring about the harmonious relations between
them and the union, and cohesion and integrity of their organization. And as an act of loyalty, a
union may certainly require its members not to affiliate with any other labor union and to consider its
infringement as a reasonable cause for separation.

The employer FPSI did nothing but to put in force their agreement when it separated the disaffiliating
union members, herein complainants, upon the recommendation of the union. Such a stipulation is
not only necessary to maintain loyalty and preserve the integrity of the union, but is allowed by the
Magna Carta of Labor when it provided that while it is recognized that an employee shall have the
right of self-organization, it is at the same time postulated that such rights shall not injure the right
of the labor organization to prescribe its own rules with respect to the acquisition or retention of
membership therein. Having ratified their CBA and being then members of FPSILU, the complainants
owe fealty and are required under the Union Security clause to maintain their membership in good
standing with it during the term thereof, a requirement which ceases to be binding only during the
60-day freedom period immediately preceding the expiration of the CBA, which was not present in
this case.

x x x the dismissal of the complainants pursuant to the demand of the majority union in accordance
with their union security [clause] agreement following the loss of seniority rights is valid and
privileged and does not constitute unfair labor practice or illegal dismissal.

Indeed, the Supreme Court has for so long a time already recognized a union security clause in the
CBA, like the one at bar, as a specie of closed-shop arrangement and trenchantly upheld the validity
of the action of the employer in enforcing its terms as a lawful exercise of its rights and obligations
under the contract.

The collective bargaining agreement in this case contains a union security clause-a closed-shop
agreement.

Labor II – 1
A closed-shop agreement is an agreement whereby an employer binds himself to hire only members
of the contracting union who must continue to remain members in good standing to keep their jobs.
It is "the most prized achievement of unionism." It adds membership and compulsory dues. By
holding out to loyal members a promise of employment in the closed-shop, it welds group solidarity.
(National Labor Union v. Aguinaldo's Echague Inc., 97 Phil. 184). It is a very effective form of union
security agreement.

This Court has held that a closed-shop is a valid form of union security, and such a provision in a
collective bargaining agreement is not a restriction of the right of freedom of association guaranteed
by the Constitution. (Lirag Textile Mills, Inc. v. Blanco, 109 SCRA 87; Manalang v. Artex
Development Company, Inc., 21 SCRA 561.)33

Hence, the present petition.

Essentially, the Labor Code of the Philippines has several provisions under which an employee may
be validly terminated, namely: (1) just causes under Article 282;34 (2) authorized causes under
Article 283;35 (3) termination due to disease under Article 284;36 and (4) termination by the
employee or resignation under Article 285.37 While the said provisions did not mention as ground the
enforcement of the Union Security Clause in the CBA, the dismissal from employment based on the
same is recognized and accepted in our jurisdiction.38

"Union security" is a generic term, which is applied to and comprehends "closed shop," "union shop,"
"maintenance of membership" or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment.39 There is
union shop when all new regular employees are required to join the union within a certain period as a
condition for their continued employment. There is maintenance of membership shop when
employees, who are union members as of the effective date of the agreement, or who thereafter
become members, must maintain union membership as a condition for continued employment until
they are promoted or transferred out of the bargaining unit or the agreement is terminated.40 A
closed-shop, on the other hand, may be defined as an enterprise in which, by agreement between
the employer and his employees or their representatives, no person may be employed in any or
certain agreed departments of the enterprise unless he or she is, becomes, and, for the duration of
the agreement, remains a member in good standing of a union entirely comprised of or of which the
employees in interest are a part.41

In their Petition, Bergante and Inguillo assail the legality of their termination based on the Union
Security Clause in the CBA between FPSI and FPSILU. Article II42 of the CBA pertains to Union
Security and Representatives, which provides:

The Company hereby agrees to a UNION SECURITY [CLAUSE] with the following terms:

1. All bonafide union members as of the effective date of this agreement and all those employees
within the bargaining unit who shall subsequently become members of the UNION during the period
of this agreement shall, as a condition to their continued employment, maintain their
membership with the UNION under the FIRST PHIL. SCALES INDUSTRIES LABOR UNION
Constitution and By-laws and this Agreement;

2. Within thirty (30) days from the signing of this Agreement, all workers eligible for membership
who are not union members shall become and to remain members in good standing as bonafide
union members therein as a condition of continued employment;

3. New workers hired shall likewise become members of the UNION from date they become regular
and permanent workers and shall remain members in good standing as bonafide union members
therein as a condition of continued employment;
Labor II – 1
4. In case a worker refused to join the Union, the Union will undertake to notify workers to join and
become union members. If said worker or workers still refuses, he or they shall be notified by the
Company of his/her dismissal as a consequence thereof and thereafter terminated after 30 days
notice according to the Labor Code.

5. Any employee/union member who fails to retain union membership in good standing may

be recommended for suspension or dismissal by the Union Directorate and/or FPSILU
Executive Council for any of the following causes:

a) Acts of Disloyalty;

b) Voluntary Resignation or Abandonment from the UNION;

c) Organization of or joining another labor union or any labor group that would work against the
UNION;

d) Participation in any unfair labor practice or violation of the Agreement, or activity derogatory to
the UNION decision;

e) Disauthorization of, or Non-payment of, monthly membership dues, fees, fines and other financial
assessments to the Union;

f) Any criminal violation or violent conduct or activity against any UNION member without
justification and affecting UNION rights or obligations under the said Agreement.

Verily, the aforesaid provision requires all members to maintain their membership with FPSILU during
the lifetime of the CBA. Failing so, and for any of the causes enumerated therein, the Union
Directorate and/or FPSILU Executive Council may recommend to FPSI an employee/union member's
suspension or dismissal. Records show that Bergante and Inguillo were former members of FPSILU
based on their signatures in the document which ratified the CBA. It can also be inferred that they
disaffiliated from FPSILU when the CBA was still in force and subsisting, as can be gleaned from the
documents relative to the intra-union dispute between FPSILU and NLM-KATIPUNAN. In view of their
disaffiliation, as well as other acts allegedly detrimental to the interest of both FPSILU and FPSI, a
"Petisyon" was submitted to Policarpio, asking for the termination of the services of employees who
failed to maintain their Union membership.

The Court is now tasked to determine whether the enforcement of the aforesaid Union Security
Clause justified herein petitioners' dismissal from the service.

In terminating the employment of an employee by enforcing the Union Security Clause, the employer
needs only to determine and prove that: (1) the union security clause is applicable; (2) the union is
requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient
evidence to support the union's decision to expel the employee from the union or company.43

We hold that all the requisites have been sufficiently met and FPSI was justified in enforcing the
Union Security Clause, for the following reasons:

First. FPSI was justified in applying the Union Security Clause, as it was a valid provision in the CBA,
the existence and validity of which was not questioned by either party. Moreover, petitioners were
among the 93 employees who affixed their signatures to the document that ratified the CBA. They
cannot now turn their back and deny knowledge of such provision.

Second. FPSILU acted on its prerogative to recommend to FPSI the dismissal of the members who
failed to maintain their membership with the Union. Aside from joining another rival union, FPSILU
Labor II – 1
cited other grounds committed by petitioners and the other employees which tend to prejudice FPSI's
interests, i.e., dereliction of duty - by failing to call periodic membership meetings and to give
financial reports; depositing union funds in the names of Grutas and former Vice-President Yolanda
Tapang, instead of in the name of FPSILU care of the President; causing damage to FPSI by
deliberately slowing down production, preventing the Union from even attempting to ask for an
increase in benefits from the former; and poisoning the minds of the rest of the members of the
Union so that they would be enticed to join the rival union.

Third. FPSILU's decision to ask for the termination of the employees in the "Petisyon" was justified
and supported by the evidence on record. Bergante and Inguillo were undisputably former members
of FPSILU. In fact, Inguillo was the Secretary of Finance, the underlying reason why his salary was
garnished to satisfy the judgment of the Med-Arbiter who ordered NLM-KATIPUNAN to return the
Union dues it erroneously collected from the employees. Their then affiliation with FPSILU was also
clearly shown by their signatures in the document which ratified the CBA. Without a doubt, they
committed acts of disloyalty to the Union when they failed not only to maintain their membership but
also disaffiliated from it. They abandoned FPSILU and even joined another union which works against
the former's interests. This is evident from the intra-union dispute filed by NLM-KATIPUNAN against
FPSILU. Once affiliated with NLM-KATIPUNAN, Bergante and Inguillo proceeded to recruit other
employees to disaffiliate from FPSILU and even collected Union dues from them.

In Del Monte Philippines,44 the stipulations in the CBA authorizing the dismissal of employees are of
equal import as the statutory provisions on dismissal under the Labor Code, since a CBA is the law
between the company and the Union, and compliance therewith is mandated by the express policy to
give protection to labor. In Caltex Refinery Employees Association (CREA) v. Brillantes,45 the Court
expounded on the effectiveness of union security clause when it held that it is one intended to
strengthen the contracting union and to protect it from the fickleness or perfidy of its own members.
For without such safeguards, group solidarity becomes uncertain; the union becomes gradually
weakened and increasingly vulnerable to company machinations. In this security clause lies the
strength of the union during the enforcement of the collective bargaining agreement. It is this clause
that provides labor with substantial power in collective bargaining.

Nonetheless, while We uphold dismissal pursuant to a union security clause, the same is not without
a condition or restriction. For to allow its untrammeled enforcement would encourage arbitrary
dismissal and abuse by the employer, to the detriment of the employees. Thus, to safeguard the
rights of the employees, We have said time and again that dismissals pursuant to union security
clauses are valid and legal, subject only to the requirement of due process, that is, notice and
hearing prior to dismissal.46 In like manner, We emphasized that the enforcement of union security
clauses is authorized by law, provided such enforcement is not characterized by arbitrariness, and
always with due process.47

There are two (2) aspects which characterize the concept of due process under the Labor Code: one
is substantive whether the termination of employment was based on the provisions of the Labor Code
or in accordance with the prevailing jurisprudence; the other is procedural - the manner in which the
dismissal was effected.

The second aspect of due process was clarified by the Court in King of Kings Transport v.
Mamac,48 stating, thus:

(1) The first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the opportunity
to submit their written explanation within a reasonable period. x x x

(2) After serving the first notice, the employers should schedule and conduct a hearing or conference
wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the

Labor II – 1
charge against them; (2) present evidence in support of their defenses; and (3) rebut the
evidence presented against them by the management. During the hearing or conference, the
employees are given the chance to defend themselves personally, with the assistance of a
representative or counsel of their choice. Moreover, this conference or hearing could be used by the
parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to justify the
severance of their employment.

Corollarily, procedural due process in the dismissal of employees requires notice and hearing. The
employer must furnish the employee two written notices before termination may be effected. The
first notice apprises the employee of the particular acts or omissions for which his dismissal is
sought, while the second notice informs the employee of the employer's decision to dismiss
him.49 The requirement of a hearing, on the other hand, is complied with as long as there was an
opportunity to be heard, and not necessarily that an actual hearing was conducted.50

In the present case, the required two notices that must be given to herein petitioners Bergante and
Inguillo were lacking. The records are bereft of any notice that would have given a semblance of
substantial compliance on the part of herein respondents. Respondents, however, aver that they had
furnished the employees concerned, including petitioners, with a copy of FPSILU's "Petisyon." We
cannot consider that as compliance with the requirement of either the first notice or the second
notice. While the "Petisyon" enumerated the several grounds that would justify the termination of the
employees mentioned therein, yet such document is only a recommendation by the Union upon
which the employer may base its decision. It cannot be considered a notice of termination. For as
agreed upon by FPSI and FPSILU in their CBA, the latter may only recommend to the former a Union
member's suspension or dismissal. Nowhere in the controverted Union Security Clause was there a
mention that once the union gives a recommendation, the employer is bound outright to proceed
with the termination.

Even assuming that the "Petisyon" amounts to a first notice, the employer cannot be deemed to have
substantially complied with the procedural requirements. True, FPSILU enumerated the grounds in
said "Petisyon." But a perusal of each of them leads Us to conclude that what was stated were
general descriptions, which in no way would enable the employees to intelligently prepare their
explanation and defenses. In addition, the "Petisyon" did not provide a directive that the employees
are given opportunity to submit their written explanation within a reasonable period. Finally, even if
We are to assume that the "Petisyon" is a second notice, still, the requirement of due process is
wanting. For as We have said, the second notice, which is aimed to inform the employee that his
service is already terminated, must state that the employer has considered all the circumstances
which involve the charge and the grounds in the first notice have been established to justify the
severance of employment. After the claimed dialogue between Policarpio and the employees
mentioned in the "Petisyon," the latter were simply told not to report for work anymore.

These defects are bolstered by Bergante and Inguillo who remain steadfast in denying that they were
notified of the specific charges against them nor were they given any memorandum to that effect.
They averred that had they been informed that their dismissal was due to FPSILU's demand/petition,
they could have impleaded the FPSILU together with the respondents. The Court has always
underscored the significance of the two-notice rule in dismissing an employee and has ruled in a
number of cases that non-compliance therewith is tantamount to deprivation of the employee's right
to due process.51

As for the requirement of a hearing or conference, We hold that respondents also failed to
substantially comply with the same. Policarpio alleged that she had a dialogue with the concerned

Labor II – 1
employees; that she explained to them the demand of FPSILU for their termination as well as the
consequences of the "Petisyon"; and that she had no choice but to act accordingly. She further
averred that Grutas even asked her to pay all the involved employees one (1)-month salary for every
year of service, plus their accrued legal holiday pay, but which she denied. She informed them that it
has been FPSI's practice to give employees, on a case-to-case basis, only one-half (' ) month salary
for every year of service and after they have tendered their voluntary resignation. The employees
refused her offer and told her that they will just file their claims with the DOLE.52

Policarpio's allegations are self-serving. Except for her claim as stated in the respondent's Position
Paper, nowhere from the records can We find that Bergante and Inguillo were accorded the
opportunity to present evidence in support of their defenses. Policarpio relied heavily on the
"Petisyon" of FPSILU. She failed to convince Us that during the dialogue, she was able to ascertain
the validity of the charges mentioned in the "Petisyon." In her futile attempt to prove compliance
with the procedural requirement, she reiterated that the objective of the dialogue was to provide the
employees "the opportunity to receive the act of grace of FPSI by giving them an amount equivalent
to one-half (' ) month of their salary for every year of service." We are not convinced. We cannot
even consider the demand and counter-offer for the payment of the employees as an amicable
settlement between the parties because what took place was merely a discussion only of the amount
which the employees are willing to accept and the amount which the respondents are willing to give.
Such non-compliance is also corroborated by Bergante and Inguillo in their pleadings denouncing
their unjustified dismissal. In fine, We hold that the dialogue is not tantamount to the hearing or
conference prescribed by law.

We reiterate, FPSI was justified in enforcing the Union Security Clause in the CBA. However, We
cannot countenance respondents' failure to accord herein petitioners the due process they deserve
after the former dismissed them outright "in order to avoid a serious labor dispute among the officers
and members of the bargaining agent."53 In enforcing the Union Security Clause in the CBA, We are
upholding the sanctity and inviolability of contracts. But in doing so, We cannot override an
employee's right to due process.54 In Carino v. National Labor Relations Commission,55 We took a firm
stand in holding that:

The power to dismiss is a normal prerogative of the employer. However, this is not without
limitation. The employer is bound to exercise caution in terminating the services of his
employees especially so when it is made upon the request of a labor union pursuant to the
Collective Bargaining Agreement x x x. Dismissals must not be arbitrary and capricious. Due
process must be observed in dismissing an employee because it affects not only his
position but also his means of livelihood. Employers should respect and protect the rights of
their employees, which include the right to labor."

Thus, as held in that case, "the right of an employee to be informed of the charges against him and
to reasonable opportunity to present his side in a controversy with either the company or his own
Union is not wiped away by a Union Security Clause or a Union Shop Clause in a collective bargaining
agreement. An employee is entitled to be protected not only from a company which disregards his
rights but also from his own Union, the leadership of which could yield to the temptation of swift and
arbitrary expulsion from membership and mere dismissal from his job."56

In fine, We hold that while Bergante and Inguillo's dismissals were valid pursuant to the enforcement
of Union Security Clause, respondents however did not comply with the requisite procedural due
process. As in the case of Agabon v. National Labor Relations Commission,57 where the dismissal is
for a cause recognized by the prevailing jurisprudence, the absence of the statutory due process
should not nullify the dismissal or render it illegal, or ineffectual. Accordingly, for violating Bergante
and Inguillo's statutory rights, respondents should indemnify them the amount of P30,000.00 each
as nominal damages.

Labor II – 1
In view of the foregoing, We see no reason to discuss the other matters raised by petitioners.

WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision
dated March 11, 2004 and Resolution dated September 17, 2004, in CA-G.R. SP No. 73992, are
hereby AFFIRMED WITH MODIFICATION in that while there was a valid ground for dismissal, the
procedural requirements for termination, as mandated by law and jurisprudence, were not observed.
Respondents First Philippine Scales, Inc. and/or Amparo Policarpio are hereby ORDERED to PAY
petitioners Zenaida Bergante and Herminigildo Inguillo the amount of P30,000.00 each as nominal
damages. No pronouncement as to costs.

Labor II – 1
 48.) [G.R. No. 149552 : March 10, 2010]

GENERAL MILLING CORPORATION, PETITIONER, VS. ERNESTO CASIO, ROLANDO IGOT,

MARIO FAMADOR, NELSON LIM, FELICISIMO BOOC, PROCOPIO OBREGON, JR., AND
ANTONIO ANINIPOK, RESPONDENTS,

AND

VIRGILIO PINO, PAULINO CABREROS, MA. LUNA P. JUMAOAS, DOMINADOR BOOC, FIDEL
VALLE, BARTOLOME AUMAN, REMEGIO CABANTAN, LORETO GONZAGA, EDILBERTO
MENDOZA AND ANTONIO PANILAG, RESPONDENTS.

DECISION

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of
the Decision[1] dated March 30, 2001 and Resolution[2] dated July 18, 2001 of the Court of Appeals in
CA-G.R. SP No. 40280, setting aside the Voluntary Arbitration Award[3] dated August 16, 1995 of the
National Conciliation and Mediation Board (NCMB), Cebu City, in VA Case No. AC 389-01-01-95.
Voluntary Arbitrator Alice K. Canonoy-Morada (Canonoy-Morada) dismissed the Complaint filed by
respondents Ernesto Casio, Rolando Igot, Mario Famador, Nelson Lim, Felicisimo Booc, Procopio
Obregon, Jr. and Antonio Aninipok (Casio, et al.) against petitioner General Milling Corporation (GMC)
for unfair labor practice, illegal suspension, illegal dismissal, and payment of moral and exemplary
damages.

The labor union Ilaw at Buklod ng Mangagawa (IBM)-Local 31 Chapter (Local 31) was the sole and
exclusive bargaining agent of the rank and file employees of GMC in Lapu-Lapu City. On November
30, 1991, IBM-Local 31, through its officers and board members, namely, respondents Virgilio Pino,
[4]
 Paulino Cabreros, Ma. Luna P. Jumaoas, Dominador Booc, Bartolome Auman, Remegio Cabantan,
Fidel Valle, Loreto Gonzaga, Edilberto Mendoza and Antonio Panilag (Pino, et al.), entered into a
Collective Bargaining Agreement (CBA) with GMC. The effectivity of the said CBA was retroactive to
August 1, 1991.[5]

The CBA contained the following union security provisions:

Section 3. MAINTENANCE OF MEMBERSHIP - All employees/workers employed by the Company with

the exception of those who are specifically excluded by law and by the terms of this Agreement must
be members in good standing of the Union within thirty (30) days upon the signing of this agreement
and shall maintain such membership in good standing thereof as a condition of their employment or
continued employment.

Section 6. The Company, upon written request of the Union, shall terminate the services of any
employee/worker who fails to fulfill the conditions set forth in Sections 3 and 4 thereof, subject
however, to the provisions of the Labor Laws of the Philippines and their Implementing Rules and
Regulations. The Union shall absolve the Company from any and all liabilities, pecuniary or otherwise,
and responsibilities to any employee or worker who is dismissed or terminated in pursuant thereof.[6]

Casio, et al. were regular employees of GMC with daily earnings ranging from P173.75 to P201.50,
and length of service varying from eight to 25 years.[7] Casio was elected IBM-Local 31 President for
a three-year term in June 1991, while his co-respondents were union shop stewards.

In a letter[8] dated February 24, 1992, Rodolfo Gabiana (Gabiana), the IBM Regional Director for
Visayas and Mindanao, furnished Casio, et al. with copies of the Affidavits of GMC employees Basilio
Inoc and Juan Potot, charging Casio, et al. with "acts inimical to the interest of the union." Through
Labor II – 1
the same letter, Gabiana gave Casio, et al. three days from receipt thereof within which to file their
answers or counter-affidavits. However, Casio, et al. refused to acknowledge receipt of Gabiana's
letter.

Subsequently, on February 29, 1992, Pino, et al., as officers and members of the IBM-Local 31,
issued a Resolution[9] expelling Casio, et al. from the union. Pertinent portions of the Resolution are
reproduced below:

Whereas, Felicisimo Booc, Rolando Igot, Procopio Obregon, Jr., Antonio Aninipok, Mario Famador,
Nelson Lim and Ernesto Casio, through Ernesto Casio have refused to acknowledge receipt of the
letter-complaint dated February 24, 1992, requiring them to file their answer[s] or counter-affidavits
as against the charge of "acts inimical to the interest of the union" and that in view of such refusal to
acknowledge receipt, a copy of said letter complaint was dropped or left in front of E. Casio;

Whereas, the three (3)[-]day period given to file their answer or counter-affidavit have already
lapsed prompting the union Board to investigate the charge ex parte;

Whereas, after such ex parte investigation the said charge has been more than adequately
substantiated by the affidavits/witnesses and documentary exhibits presented.

NOW, THEREFORE, RESOLVED as it is hereby RESOLVED, that Ernesto Casio, Felicisimo Booc,
Rolando Igot, Procopio Obregon, Jr., Antonio Aninipok, Mario Famador and Nelson Lim be expelled as
union member[s] of good standing effectively immediately.

RESOLVED FURTHER, to furnish copy of this Resolution to the GMC Management for their information
and guidance with the recommendation as it is hereby recommended to dismiss the above-named
employees from work.

Gabiana then wrote a letter[10] dated March 10, 1992, addressed to Eduardo Cabahug (Cabahug),
GMC Vice-President for Engineering and Plant Administration, informing the company of the expulsion
of Casio, et al. from the union pursuant to the Resolution dated February 29, 1992 of IBM-Local 31
officers and board members. Gabiana likewise requested that Casio, et al. "be immediately dismissed
from their work for the interest of industrial peace in the plant."

Gabiana followed-up with another letter[11] dated March 19, 1992, inquiring from Cabahug why
Casio, et al. were still employed with GMC despite the request of IBM-Local 31 that Casio, et al. be
immediately dismissed from service pursuant to the closed shop provision in the existing CBA.
Gabiana reiterated the demand of IBM-Local 31 that GMC dismiss Casio, et al., with the warning that
failure of GMC to do so would constitute gross violation of the existing CBA and constrain the union to
file a case for unfair labor practice against GMC.

Pressured by the threatened filing of a suit for unfair labor practice, GMC acceded to Gabiana's
request to terminate the employment of Casio,  et al. GMC issued a Memorandum dated March 24,
1992 terminating the employment of Casio, et al. effective April 24, 1992 and placing the latter
under preventive suspension for the meantime.

On March 27, 1992, Casio, et al., in the name of IBM-Local 31, filed a Notice of Strike with the
NCMB-Regional Office No. VII (NCMB-RO). Casio, et al. alleged as bases for the strike the illegal
dismissal of union officers and members, discrimination, coercion, and union busting. The NCMB-RO
held conciliation proceedings, but no settlement was reached among the parties.[12]

Casio, et al. next sought recourse from the National Labor Relations Commission (NLRC) Regional
Arbitration Branch VII by filing on August 3, 1992 a Complaint against GMC and Pino, et al. for unfair
labor practice, particularly, the termination of legitimate union officers, illegal suspension, illegal
dismissal, and moral and exemplary damages. Their Complaint was docketed as NLRC Case No. RAB-
Labor II – 1
VII-08-0639-92.[13]

Finding that NLRC Case No. RAB-VII-08-0639-92 did not undergo voluntary arbitration, the Labor
Arbiter dismissed the case for lack of jurisdiction, but endorsed the same to the NCMB-RO. Prior to
undergoing voluntary arbitration before the NCMB-RO, however, the parties agreed to first submit
the case to the grievance machinery of IBM-Local 31. On September 7, 1994, Casio, et al. filed their
Complaint with Pino, the Acting President of IBM-Local 31. Pino acknowledged receipt of the
Complaint and assured Casio, et al. that they would be "seasonably notified of whatever decision
and/or action the Board may have in the instant case."[14] When the IBM-Local 31 Board failed to hold
grievance proceedings on the Complaint of Casio, et al., NCMB Voluntary Arbitrator Canonoy-Morada
assumed jurisdiction over the same. The Complaint was docketed as VA Case No. AC 389-01-01-95.

Based on the Position Papers and other documents submitted by the parties,[15] Voluntary Arbitrator
Canonoy-Morada rendered on August 16, 1995 a Voluntary Arbitration Award dismissing the
Complaint in VA Case No. AC 389-01-01-95 for lack of merit, but granting separation pay and
attorney's fees to Casio, et al. The Voluntary Arbitration Award presented the following findings: (1)
the termination by GMC of the employment of Casio, et al. was in valid compliance with the closed
shop provision in the CBA; (2) GMC had no competence to determine the good standing of a union
member; (3) Casio, et al. waived their right to due process when they refused to receive Gabiana's
letter dated February 24, 1992, which required them to submit their answer to the charges against
them; (4) the preventive suspension of Casio, et al. by GMC was an act of self-defense; and (5) the
IBM-Local 31 Resolution dated February 29, 1992 expelling Casio, et al. as union members, also
automatically ousted them as union officers.[16] The dispositive portion of the Voluntary Arbitration
Award reads:

WHEREFORE, above premises considered, this case filed by [Casio, et al.] is hereby ordered
DISMISSED for lack of merit.

Since the dismissal is not for a cause detrimental to the interest of the company, respondent General
Milling Corporation is, nonetheless, ordered to pay separation pay to all [Casio, et al.] within seven
(7) calendar days upon receipt of this order at the rate of one-half month per year of service
reckoned from the time of their employment until the date of their separation on March 24, 1992,
thus:

Employee Date Hired Rate/Month Service Total

(1/2 mo/yr of service)
Casio April 24/74 P2,636.29 x 18 years = P47,453.22
Igot May 1980 P2,472.75 x 12 years = P29,673.00
Famador Feb. 1977 P2,498.92 x 15 years = P37,483.80
Lim Aug. 1975 P2,466.21 x 17 years = P41,925.57
Booc Aug. 1978 P2,498.92 x 14 years = P34,984.88
Obregon May 1984 P2,273.23 x 08 years = P18,185.84
Aninipok Sept. 1967 P2,616.01 x 25 years = P65,400.25

The attorney's fees for [Casio, et al.'s] counsel shall be ten percent (10%) of the total amount due
them; and shall be shared proportionately by all of the same [Casio, et al.].

All other claims are hereby denied.[17]

Dissatisfied with the Voluntary Arbitration Award, Casio, et al. went to the Court of Appeals by way of
a Petition for Certiorari under Rule 65 of the Rules of Court to have said Award set aside.

The Court of Appeals granted the writ of certiorari and set aside the Voluntary Arbitration Award. The
appellate court ruled that while the dismissal of Casio, et al., was made by GMC pursuant to a valid

Labor II – 1
closed shop provision under the CBA, the company, however, failed to observe the elementary rules
of due process in implementing the said dismissal. Consequently, Casio, et al. were entitled to
reinstatement with backwages from the time of their dismissal up to the time of their reinstatement.
Nevertheless, the Court of Appeals did not hold GMC liable to Casio, et al. for moral and exemplary
damages and attorney's fees, there being no showing that their dismissal was attended by bad faith
or malice, or that the dismissal was effected in a wanton, oppressive, or malevolent manner, given
that GMC merely accommodated the request of IBM-Local 31. The appellate court, instead, made
Pino, et al. liable to Casio, et al., for moral and exemplary damages and attorney's fees, since it was
on the basis of the imputations and actuations of Pino, et al. that Casio, et al. were illegally dismissed
from employment. The Court of Appeals thus decreed:

WHEREFORE, the assailed award is hereby SET ASIDE, and private respondent General Milling
Corporation is hereby ordered to reinstate [Casio, et al.] to their former positions without loss of
seniority rights, and to pay their full backwages, solidarily with [Pino, et al.]. Further, [Pino, et al.]
are ordered to indemnify each of [Casio, et al.] in the form of moral and exemplary damages in the
amounts of P50,000.00 and P30,000.00, respectively, and to pay attorney's fees.[18]

The Motion for Reconsideration of GMC was denied by the Court of Appeals in the Resolution dated
July 18, 2001.

Hence, GMC filed the instant Petition for Review, arguing that:

THE HONORABLE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OF OR EXCESS OF JURISDICTION WHEN IT SET ASIDE THE AWARD OF THE VOLUNTARY
ARBITRATOR, AND IN AWARDING REINSTATEMENT AND FULL BACKWAGES TO [Casio, et al.].

II

THE HONORABLE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION WHEN IT SAID THAT PETITIONER GMC FAILED TO ACCORD DUE
PROCESS TO [Casio, et al.].

III

THE HONORABLE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OF OR EXCESS OF JURISDICTION WHEN IT DID NOT ABSOLVE PETITIONER GMC OF ANY
LIABILITY AND INSTEAD RULED THAT IT WAS SOLIDARILY LIABLE WITH THE UNION OFFICERS FOR
THE PAYMENT OF FULL BACKWAGES TO [Casio, et al.].

At this point, we take note that Pino, et al. did not appeal from the decision of the Court of Appeals.

GMC avers that in reviewing and reversing the findings of the Voluntary Arbitrator, the Court of
Appeals departed from the principle of conclusiveness of the trial judge's findings. GMC also claims
that the findings of the Voluntary Arbitrator as to the legality of the termination from employment of
Casio, et al. are well supported by evidence. GMC further insists that before IBP-Local 31 expelled
Casio, et al. from the union and requested GMC to dismiss Casio, et al. from service pursuant to the
closed shop provision in the CBA, IBP-Local 31 already accorded Casio, et al. due process, only that
Casio, et al. refused to avail themselves of such opportunity. GMC additionally maintains that
Casio, et al. were expelled by IBP-Local 31 for "acts inimical to the interest of the union," and GMC
had no authority to inquire into or rule on which employee-member is or is not loyal to the union,
this being an internal affair of the union. Thus, GMC had to rely on the presumption that Pino, et
al. regularly performed their duties and functions as IBP-Local 31 officers and board members, when
the latter investigated and ruled on the charges against Casio, et al.[19] GMC finally asserts that

Labor II – 1
Pino, et al., the IBP-Local 31 officers and board members who resolved to expel Casio, et al. from the
union, and not GMC, should be held liable for the reinstatement of and payment of full backwages to
Casio, et al. for the company had acted in good faith and merely complied with the closed shop
provision in the CBA.

On the other hand, Casio, et al. counters that GMC failed to identify the specific pieces of evidence
supporting the findings of the Voluntary Arbitrator. Casio, et al. contends that to accord them due
process, GMC itself, as the employer, should have held proceedings distinct and separate from those
conducted by IBM-Local 31. GMC cannot justify its failure to conduct its own inquiry using the
argument that such proceedings would constitute an intrusion by the company into the internal
affairs of the union. The claim of GMC that it had acted in good faith when it dismissed Casio, et al.
from service in accordance with the closed shop provision of the CBA is inconsistent with the failure
of the company to accord the dismissed employees their right to due process.

In general, in a "petition for review on certiorari as a mode of appeal under Rule 45 of the Rules of
Court, the petitioner can raise only questions of law - the Supreme Court is not the proper venue to
consider a factual issue as it is not a trier of facts. A departure from the general rule may be
warranted where the findings of fact of the Court of Appeals are contrary to the findings and
conclusions of the trial court [or quasi-judicial agency, as the case may be], or when the same is
unsupported by the evidence on record."[20]

Whether Casio, et al. were illegally dismissed without any valid reason is a question of fact better left
to quasi-judicial agencies to determine. In this case, the Voluntary Arbitrator was convinced that
Casio, et al. were legally dismissed; while the Court of Appeals believed the opposite, because even
though the dismissal of Casio, et al. was made by GMC pursuant to a valid closed shop provision in
the CBA, the company still failed to observe the elementary rules of due process. The Court is
therefore constrained to take a second look at the evidence on record considering that the factual
findings of the Voluntary Arbitrator and the Court of Appeals are contradictory.

There are two aspects which characterize the concept of due process under the Labor Code: one is
substantive - whether the termination of employment was based on the provision of the Labor Code
or in accordance with the prevailing jurisprudence; the other is procedural - the manner in which the
dismissal was effected.[21]

After a thorough review of the records, the Court agrees with the Court of Appeals. The dismissal of
Casio, et al. was indeed illegal, having been done without just cause and the observance of
procedural due process.

In Alabang Country Club, Inc. v. National Labor Relations Commission,[22] the Court laid down the
grounds for which an employee may be validly terminated, thus:

Under the Labor Code, an employee may be validly terminated on the following grounds: (1) just
causes under Art. 282; (2) authorized causes under Art. 283; (3) termination due to disease under
Art. 284, and (4) termination by the employee or resignation under Art. 285.

Another cause for termination is dismissal from employment due to the enforcement of the
union security clause in the CBA. x x x. (Emphasis ours.)

"Union security" is a generic term, which is applied to and comprehends "closed shop," "union shop,"
"maintenance of membership," or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment. There is union
shop when all new regular employees are required to join the union within a certain period as a
condition for their continued employment. There is maintenance of membership shop when
employees, who are union members as of the effective date of the agreement, or who thereafter
become members, must maintain union membership as a condition for continued employment until
Labor II – 1
they are promoted or transferred out of the bargaining unit or the agreement is terminated. A closed
shop, on the other hand, may be defined as an enterprise in which, by agreement between the
employer and his employees or their representatives, no person may be employed in any or certain
agreed departments of the enterprise unless he or she is, becomes, and, for the duration of the
agreement, remains a member in good standing of a union entirely comprised of or of which the
employees in interest are a part.[23]

Union security clauses are recognized and explicitly allowed under Article 248(e) of the Labor Code,
which provides that:

Art. 248. Unfair Labor Practices of Employers. x x x

xxxx

(e) To discriminate in regard to wages, hours of work, and other terms and conditions of employment
in order to encourage or discourage membership in any labor organization. Nothing in this Code or
in any other law shall stop the parties from requiring membership in a recognized
collective bargaining agent as a condition for employment, except those employees who
are already members of another union at the time of the signing of the collective
bargaining agreement.  (Emphasis supplied.)

It is State policy to promote unionism to enable workers to negotiate with management on an even
playing field and with more persuasiveness than if they were to individually and separately bargain
with the employer. For this reason, the law has allowed stipulations for "union shop" and "closed
shop" as means of encouraging workers to join and support the union of their choice in the protection
of their rights and interest vis-Ã -vis the employer.[24]

Moreover, a stipulation in the CBA authorizing the dismissal of employees are of equal import as the
statutory provisions on dismissal under the Labor Code, since "a CBA is the law between the
company and the union and compliance therewith is mandated by the express policy to give
protection to labor."[25]

In terminating the employment of an employee by enforcing the union security clause, the employer
needs only to determine and prove that: (1) the union security clause is applicable; (2) the union is
requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient
evidence to support the decision of the union to expel the employee from the union. These requisites
constitute just cause for terminating an employee based on the union security provision of the CBA.
[26]

There is no question that in the present case, the CBA between GMC and IBM-Local 31 included a
maintenance of membership and closed shop clause as can be gleaned from Sections 3 and 6 of
Article II. IBM-Local 31, by written request, can ask GMC to terminate the employment of the
employee/worker who failed to maintain its good standing as a union member.

It is similarly undisputed that IBM-Local 31, through Gabiana, the IBM Regional Director for Visayas
and Mindanao, twice requested GMC, in the letters dated March 10 and 19, 1992, to terminate the
employment of Casio, et al. as a necessary consequence of their expulsion from the union.

It is the third requisite - that there is sufficient evidence to support the decision of IBM-
Local 31 to expel Casio, et al. - which appears to be lacking in this case.

The full text of the individual but identical termination letters,[27] served by GMC on Casio, et al., is
very revealing. They read:

Labor II – 1
To: [Employee's Name]
From: Legal Counsel
Subject: Dismissal Upon Union Request Thru
CBA Closed Shop Provision

The company is in receipt of two letters dated March 10, 1992 and March 19, 1992 respectively from
the union at the Mill in Lapulapu demanding the termination of your employment pursuant to the
closed shop provision of our existing Collective Bargaining Agreement. It appears from the
attached resolutions that you have been expelled from union membership and has thus
ceased to become a member in good standing. The resolutions are signed by the same officers
who executed and signed our existing CBA, copies of the letters and resolutions are enclosed hereto
for your reference.

The CBA in Article II provides the following:

Section 3. MAINTENANCE OF MEMBERSHIP - All employees/workers employed by the Company with

the exception of those who are specifically excluded by law and by the terms of this Agreement must
be members in good standing of the Union within thirty (30) days upon the signing of this agreement
and shall maintain such membership in good standing thereof as a condition of their employment or
continued employment.

Section 6. The Company, upon written request of the Union, shall terminate the services of any
employee/worker who fails to fulfill the conditions set forth in Sections 3 and 4 thereof, subject
however, to the provisions of the Labor Laws of the Philippines and their Implementing Rules and
Regulations. The Union shall absolve the Company from any and all liabilities, pecuniary or otherwise,
and responsibilities to any employee or worker who is dismissed or terminated in pursuant thereof.

The provisions of the CBA are clear enough. The termination of employment on the basis of the
closed shop provision of the CBA is well recognized in law and in jurisprudence.

There is no valid ground to refuse to terminate. On the other hand as pointed out in the union's
strongly demanding letter dated March 19, 1992, the company could be sued for unfair labor
practice. While we would have wanted not to accommodate the union's request, we are
left with no other option. The terms of the CBA should be respected. To refuse to enforce the CBA
would result in the breakdown of industrial peace and the end of harmonious relations between the
union and management. The company would face the collective anger and enmity of its employees
who are union members.

In the light of the union's very insistent demand, verbal and in writing and to avoid the union
accusation of "coddling" you, and considering the explicitly mandatory language of the closed shop
provision of the CBA, the company is constrained to terminate your employment, to give you ample
time to look and find another employment, and/or exert efforts to become again a member of good
standing of your union, effective April 24, 1992.

In the meantime, to prevent serious danger to the life and property of the company and of its
employees, we are placing you under preventive suspension beginning today.

It is apparent from the aforequoted letter that GMC terminated the employment of
Casio, et al. relying upon the Resolution dated February 29, 1992 of Pino, et al. expelling
Casio, et al. from IBM-Local 31; Gabiana's Letters dated March 10 and 19, 1992 demanding that
GMC terminate the employment of Casio, et al. on the basis of the closed shop clause in the CBA;
and the threat of being sued by IBM-Local 31 for unfair labor practice. The letter made no mention
at all of the evidence supporting the decision of IBM-Local 31 to expel Casio, et al. from
the union. GMC never alleged nor attempted to prove that the company actually looked into the
evidence of IBM-Local 31 for expelling Casio, et al. and made a determination on the sufficiency
Labor II – 1
thereof. Without such a determination, GMC cannot claim that it had terminated the employment of
Casio, et al. for just cause.

The failure of GMC to make a determination of the sufficiency of evidence supporting the
decision of IBM-Local 31 to expel Casio, et al. is a direct consequence of the non-
observance by GMC of procedural due process in the dismissal of employees.

As a defense, GMC contends that as an employer, its only duty was to ascertain that IBM-Local 31
accorded Casio, et al. due process; and, it is the finding of the company that IBM-Local 31 did give
Casio, et al. the opportunity to answer the charges against them, but they refused to avail
themselves of such opportunity.

This argument is without basis.

The Court has stressed time and again that allegations must be proven by sufficient evidence
because mere allegation is definitely not evidence.[28] Once more, in Great Southern Maritime
Services Corporation. v. Acuña,[29] the Court declared:

Time and again we have ruled that in illegal dismissal cases like the present one, the onus of proving
that the employee was not dismissed or if dismissed, that the dismissal was not illegal, rests on the
employer and failure to discharge the same would mean that the dismissal is not justified and
therefore illegal. Thus, petitioners must not only rely on the weakness of respondents'
evidence but must stand on the merits of their own defense. A party alleging a critical fact
must support his allegation with substantial evidence for any decision based on
unsubstantiated allegation cannot stand as it will offend due process. x x x. (Emphasis
supplied.)

The records of this case are absolutely bereft of any supporting evidence to substantiate the bare
allegation of GMC that Casio, et al. were accorded due process by IBM-Local 31. There is nothing on
record that would indicate that IBM-Local 31 actually notified Casio, et al. of the charges against
them or that they were given the chance to explain their side. All that was stated in the IBM-Local 31
Resolution dated February 29, 1992, expelling Casio, et al. from the union, was that "a copy of the
said letter complaint [dated February 24, 1992] was dropped or left in front of E. Casio."[30] It was
not established that said letter-complaint charging Casio, et al. with acts inimical to the interest of
the union was properly served upon Casio, that Casio willfully refused to accept the said letter-notice,
or that Casio had the authority to receive the same letter-notice on behalf of the other employees
similarly accused. It's worthy to note that Casio, et al. were expelled only five days after the issuance
of the letter-complaint against them. The Court cannot find proof on record when the three-day
period, within which Casio, et al. was supposed to file their answer or counter-affidavits, started to
run and had expired. The Court is likewise unconvinced that the said three-day period was sufficient
for Casio, et al. to prepare their defenses and evidence to refute the serious charges against them.

Contrary to the position of GMC, the acts of Pino,  et al. as officers and board members of IBM-Local
31, in expelling Casio, et al. from the union, do not enjoy the presumption of regularity in the
performance of official duties, because the presumption applies only to public officers from the
highest to the lowest in the service of the Government, departments, bureaus, offices, and/or its
political subdivisions.[31]

More importantly, in Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc., [32] the Court
issued the following reminder to employers:

The power to dismiss is a normal prerogative of the employer. However, this is not without
limitations. The employer is bound to exercise caution in terminating the services of his employees
especially so when it is made upon the request of a labor union pursuant to the Collective Bargaining
Agreement. x x x. Dismissals must not be arbitrary and capricious. Due process must be observed in
Labor II – 1
dismissing an employee because it affects not only his position but also his means of livelihood.
Employers should therefore respect and protect the rights of their employees, which include the right
to labor. x x x.

The Court reiterated in Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos [33] that:

While respondent company may validly dismiss the employees expelled by the union for disloyalty
under the union security clause of the collective bargaining agreement upon the recommendation by
the union, this dismissal should not be done hastily and summarily thereby eroding the employees'
right to due process, self-organization and security of tenure. The enforcement of union security
clauses is authorized by law provided such enforcement is not characterized by arbitrariness,
and always with due process. Even on the assumption that the federation had valid grounds to
expel the union officers, due process requires that these union officers be accorded a
separate hearing by respondent company.  (Emphases supplied.)

The twin requirements of notice and hearing constitute the essential elements of procedural due
process. The law requires the employer to furnish the employee sought to be dismissed with two
written notices before termination of employment can be legally effected: (1) a written notice
apprising the employee of the particular acts or omissions for which his dismissal is sought in order
to afford him an opportunity to be heard and to defend himself with the assistance of counsel, if he
desires, and (2) a subsequent notice informing the employee of the employer's decision to dismiss
him. This procedure is mandatory and its absence taints the dismissal with illegality.[34]

Irrefragably, GMC cannot dispense with the requirements of notice and hearing before dismissing
Casio, et al. even when said dismissal is pursuant to the closed shop provision in the CBA. The rights
of an employee to be informed of the charges against him and to reasonable opportunity to present
his side in a controversy with either the company or his own union are not wiped away by a union
security clause or a union shop clause in a collective bargaining agreement. An employee is entitled
to be protected not only from a company which disregards his rights but also from his own union the
leadership of which could yield to the temptation of swift and arbitrary expulsion from membership
and hence dismissal from his job.[35]

In the case at bar, Casio, et al. did not receive any other communication from GMC, except the
written notice of termination dated March 24, 1992. GMC, by its own admission, did not conduct a
separate and independent investigation to determine the sufficiency of the evidence supporting the
expulsion of Casio, et al. by IBP-Local 31. It straight away acceded to the demand of IBP-Local 31 to
dismiss Casio, et al.

The very same circumstances took place in Liberty Cotton Mills, wherein the Court held that the
employer-company acted in bad faith in dismissing its workers without giving said workers an
opportunity to present their side in the controversy with their union, thus:

While respondent company, under the Maintenance of Membership provision of the Collective
Bargaining Agreement, is bound to dismiss any employee expelled by PAFLU for disloyalty, upon its
written request, this undertaking should not be done hastily and summarily. The company acted in
bad faith in dismissing petitioner workers without giving them the benefit of a hearing. It
did not even bother to inquire from the workers concerned and from PAFLU itself about the
cause of the expulsion of the petitioner workers. Instead, the company immediately dismissed
the workers on May 30, 1964 after its receipt of the request of PAFLU on May 29, 1964 - in a span of
only one day - stating that it had no alternative but to comply with its obligation under the Security
Agreement in the Collective Bargaining Agreement, thereby disregarding the right of the workers to
due process, self-organization and security of tenure.[36] (Emphasis ours.)

In sum, the Court finds that GMC illegally dismissed Casio, et al. because not only did GMC fail to
make a determination of the sufficiency of evidence to support the decision of IBM-Local 31 to expel
Labor II – 1
Casio, et al., but also to accord the expelled union members procedural due process, i.e., notice and
hearing, prior to the termination of their employment

Consequently, GMC cannot insist that it has no liability for the payment of backwages and damages
to Casio, et al., and that the liability for such payment should fall only upon Pino, et al., as the IBP-
Local 31 officers and board members who expelled Casio, et al. GMC completely missed the point
that the expulsion of Casio, et al. by IBP-Local 31 and the termination of employment of the same
employees by GMC, although related, are two separate and distinct acts. Despite a closed shop
provision in the CBA and the expulsion of Casio, et al. from IBP-Local 31, law and jurisprudence
imposes upon GMC the obligation to accord Casio, et al. substantive and procedural due process
before complying with the demand of IBP-Local 31 to dismiss the expelled union members from
service. The failure of GMC to carry out this obligation makes it liable for illegal dismissal of Casio, et
al.

In Malayang Samahan ng mga Manggagawa sa M. Greenfield, [37] the Court held that notwithstanding
the fact that the dismissal was at the instance of the federation and that the federation undertook to
hold the company free from any liability resulting from the dismissal of several employees, the
company may still be held liable if it was remiss in its duty to accord the would-be dismissed
employees their right to be heard on the matter.

An employee who is illegally dismissed is entitled to the twin reliefs of full backwages and
reinstatement. If reinstatement is not viable, separation pay is awarded to the employee. In
awarding separation pay to an illegally dismissed employee, in lieu of reinstatement, the amount to
be awarded shall be equivalent to one month salary for every year of service. Under Republic Act No.
6715, employees who are illegally dismissed are entitled to full backwages, inclusive of allowances
and other benefits or their monetary equivalent, computed from the time their actual compensation
was withheld from them up to the time of their actual reinstatement but if reinstatement is no longer
possible, the backwages shall be computed from the time of their illegal termination up to the finality
of the decision. Thus, Casio, et al. are entitled to backwages and separation pay considering that
reinstatement is no longer possible because the positions they previously occupied are no longer
existing, as declared by GMC.[38]

Casio, et al., having been compelled to litigate in order to seek redress for their illegal dismissal, are
entitled to the award of attorney's fees equivalent to 10% of the total monetary award.[39]

WHEREFORE, the instant petition is hereby DENIED. The assailed decision of the Court of Appeals
dated March 30, 2001 in CA-G.R. SP No. 40280 is AFFIRMED.

Labor II – 1
 49.) [G.R. NO. 167727 : July 30, 2007]

CRAYONS PROCESSING, INC., Petitioner, v. FELIPE PULA and COURT OF APPEALS (Fifth

Division), Respondents.

DECISION

TINGA, J.:

The key facts are undisputed.

Petitioner Crayons Processing, Inc. (Crayons) employed respondent Felipe Pula (Pula) as a
Preparation Machine Operator beginning June 1993. On 27 November 1999, Pula, then aged 34,
suffered a heart attack and was rushed to the hospital, where he was confined for around a week.
Pula's wife duly notified Crayons of her husband's medical condition.1

Upon his discharge from the hospital, Pula was advised by his attending physician to take a leave of
absence from work and rest for three (3) months. Subsequently, on 25 February 2000, Pula
underwent an Angiogram Test at the Philippine Heart Center under the supervision of a Dr. Recto,
who advised him to take a two-week leave from work.2

Following the angiogram procedure, respondent was certified as "fit to work" by Dr. Recto. On 11
April 2000, Pula returned to work, but 13 days later, he was taken to the company clinic after
complaining of dizziness. Diagnosed as having suffered a relapse, he was advised by his physician to
take a leave of absence from work for one (1) month.

Pula reported back for work on 13 June 2000, armed with a certification from his physician that he
was "fit to work." However, Pula claimed that he was not given any post or assignment, but instead,
on 20 June 2000, he was asked to resign with an offer from Crayons of P12,000 as financial
assistance.3 Pula refused the offer and instead filed a complaint for illegal dismissal with prayer for
damages and the payment of holiday premium, 5 days service incentive leave pay, and 13th month
pay for 1999. The complaint was filed against Crayons, Clothman Knitting Corp., Nixon Lee, Paul Lee,
Peter Su, and Ellen Caluag.4

It appears that Crayons and the other named respondents in the complaint, except one, failed to
appear during the preliminary conferences and the hearings. Only Nixon Lee appeared before the
National Labor Relations Commission (NLRC) but only to manifest that he should be excluded from
the complaint as he had no hand in the management of the employees and that there was an intra-
corporate squabble between him and his co-respondents Peter Su and Paul Lee, who had denied him
access to the company premises. Despite their previous non-appearance, the other respondents
belatedly filed a Position Paper alleging that Pula had not been dismissed at all, but had only been
offered a less strenuous job. They prayed that Pula be ordered to report for work without loss of
seniority rights.5

In a Decision6 dated 20 November 2001, Labor Arbiter Marita V. Padolina ruled that Pula had been
illegally dismissed and ordered reinstatement to his former position without loss of seniority rights.
Pula was awarded backwages computed from the time of his dismissal on 20 June 2000, as well as
service incentive leave pay, 13th month pay, and attorney's fees.

The Labor Arbiter took Crayons and its co-respondents to task for failing to participate in the
proceedings despite notice, and for belatedly filing their Position Paper which contained "bare denials
and unsubstantiated allegations."7 She described their claim of non-dismissal as "a deleterious
scheme" and a "last-ditch effort in order for [the Labor Arbiter] to treat the case as water under the
Labor II – 1
bridge."8 Instead, the Labor Arbiter concluded as evident from the facts that Pula was illegally
dismissed and "denied his right to security of tenure when he was not allowed to work on 13 June
2000."9 Rejecting Crayons' contention that Pula's ailment was a proper reason to dismiss him, the
Labor Arbiter stressed that no evidence was presented to show that his illness could not be cured
within the period of six months. It was pointed out that under Section 8, Rule I, Book VI of the
Omnibus Rules Implementing the Labor Code, implementing in particular Article 284 of the Labor
Code, termination on the ground of disease is prohibited unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot
be cured within a period of six months even with proper medical treatment.10

On appeal, the NLRC ruled, in a Decision dated 18 March 2003,11 that there was indeed valid cause to
terminate Pula's employment considering that he had a heart attack that kept him out of work for
more than six (6) months. According to the NLRC, the fact that Pula was on leave for more than six
months due to his illness rendered unnecessary the certification from a public health authority as
required under the Omnibus Implementing Rules. As a result, the Labor Arbiter ruled that the
dismissal was valid, although respondent was entitled to separation pay in accordance with Article
284 of the Labor Code.

Pula assailed the NLRC Decision by way of a special civil action for certiorari before the Court of
Appeals. In a Decision12 dated 25 October 2004, the Court of Appeals annulled the NLRC Decision and
reinstated the ruling of the Labor Arbiter.

In favoring Pula, the appellate court gave credence to his claims over that of Crayons, particularly
stressing that Crayons failed to specifically deny respondent's allegations that he was no longer given
any assignment by Crayons after he had reported back for work on 13 June 2000, and that he was
asked to resign on 20 June 2000. The Court of Appeals thus engaged the suppletory application of
Section 11, Rule 8 of the 1997 Rules of Civil Procedure, which provides in essence that material
allegations in the complaint which are not specifically denied are deemed admitted.

The Court of Appeals did observe that Crayons, in its Comment13 before the appellate court, attached
a report14 prepared by Ellen Caluag, Crayons' HRD Head. The report narrated that during the time
Pula was purportedly dismissed, Crayons had told him that it was willing to allow him to return to
work, provided that he undergo a medical examination by a certain Dr. Ting, who was to prepare a
certification as to his fitness to return to work. Allegedly, after Pula had an initial consultation with
Dr. Ting, he failed to submit the medical findings prepared by the Philippine Heart Center which
would serve as basis for the medical certification. Instead, Pula filed the instant complaint for illegal
dismissal. Nonetheless, the Court of Appeals refused to give weight to the report prepared by Caluag,
noting that not having been acknowledged before a notary public, it was hearsay and of nil probative
value.15

Before this Court, Crayons argues that the Court of Appeals erred in dismissing the Caluag Report,
saying that the refusal to entertain the same was prejudicial to its substantial rights.16 Crayons also
claims that "[it] was merely exercising prudence in not giving [Pula] work on June 13, 2000;"17 that
the medical certification attesting to his fitness to return to work then "did not guarantee [Pula's]
fitness to work,"18 and; that the situation dictated that it exercise prudence and exert every effort "to
ascertain the health condition of [Pula], thus prompting [Crayon's] referral to its company doctor, Dr.
Ting."19 Assuming arguendo that Pula was indeed terminated on 13 June 2000, Crayons argues that
the NLRC correctly ruled that there was valid cause to terminate respondent's employment20 owing to
his medical condition, in accordance with Article 284 of the Labor Code and its implementing rules.
Betraying its real motivation behind the "assuming arguendo" ploy, Crayons prays for the
reinstatement of the NLRC decision upholding the termination of Pula under Article 284 of the Labor
Code.21

Labor II – 1
We begin first by upholding the Court of Appeals when it refused to give credence to the Caluag
report. It appears that this report emerged at first instance only in the proceedings before the Court
of Appeals. No reference was made to it before the Labor Arbiter or the NLRC. The report, as
attached to Crayons' Comment before the Court of Appeals, is undated and unverified. It is
addressed to no one in particular, certainly not to any court or tribunal, and is not accompanied by
any motion or pleading seeking its admission as evidence. It is, as the Court of Appeals ruled,
hearsay in character. It could have easily been introduced in evidence before the Labor Arbiter.
Caluag herself could have likewise easily appeared before the Labor Arbiter herself to give testimony
or otherwise verify under oath the contents of such report, especially since she herself was named as
a respondent in the complaint. Yet Crayons and Caluag did neither, limiting their participation before
the Labor Arbiter to a three (3)-page, seven (7)-paragraph Position Paper22 that stands out as a
classic example of a pro forma pleading, and which was, to boot, filed five (5) months late.

Before this Court, Crayons is all too willing to stress the neglect in the handling of the case by the
former counsel of [Crayons] who represented it before the Labor Arbiter. Yet the general rule is that
the client is bound by the mistakes of his counsel, save when the negligence of counsel is so gross,
reckless and inexcusable that the client is deprived of his day in court.23 Espinosa v. Court of
Appeals24 explicates the requisite character of counsel's negligence that would be sufficient to excuse
the client from the consequences thereof.

Citing the cases of Legarda v. Court of Appeals  and Alabanzas v. IAC[,] Espinosa invokes the
exception to the general rule that a client need not be bound by the actions of counsel who is grossly
and palpably negligent. These very cases cited demonstrate why Atty. Castillon's acts hardly
constitute gross or palpable negligence. Legarda provides a textbook example of gross negligence on
the part of the counsel. The Court therein noted the following negligent acts of lawyer Antonio
Coronel:

Petitioner's counsel is a well-known practicing lawyer and dean of a law school. It is to be expected
that he would extend the highest quality of service as a lawyer to the petitioner. Unfortunately,
counsel appears to have abandoned the cause of petitioner. After agreeing to defend the petitioner in
the civil case filed against her by private respondent, said counsel did nothing more than enter his
appearance and seek for an extension of time to file the answer. Nevertheless, he failed to file the
answer. Hence, petitioner was declared in default on motion of private respondent's counsel. After
the evidence of private respondent was received ex-parte, a judgment, was rendered by the trial
court.

Said counsel for petitioner received a copy of the judgment but took no steps to have the same set
aside or to appeal therefrom. Thus, the judgment became final and executory.

Gross negligence on the part of the counsel in Legarda is clearly established, characterized by a
series of negligent omissions that led to a final executory judgment against the client, who never
once got her side aired before the court of law before finality of judgment set in. The actions of Atty.
Castillon hardly measure up to this standard of gross negligence exhibited in the Legarda  case. ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

On the other hand, in Alabanzas counsel failed to file an appellant's brief, thereby causing the
dismissal of the appeal before the Court of Appeals. Despite such inexcusable and fatal lapse, the
Court ruled that it was not sufficient to establish such gross or palpable negligence that justified a
deviation from the rule that clients should be bound by the acts and mistakes of their counsel. It
strikes as odd that Espinosa should cite Alabanzas  in the first place, considering that the lapse of the
counsel therein was far worse than that imputed to Atty. Castillon, yet the Court anyway still refused
to apply the exception to the general rule.25

The failure of Crayons to submit any evidence worthy of credence to bolster its factual allegations
stands independent of the failures of its former counsel before the Labor Arbiter. It may have been a

Labor II – 1
different story had the Caluag report been verified under oath or submitted as an affidavit. Even if
questions on its admissibility past the Labor Arbiter stage of proceedings would linger, at least it
would manifest some good faith or earnest effort on the part of Crayons to submit credible evidence
in support of its bare allegations. Such a showing may be cause to mitigate the damage wrought by
the negligence of its former counsel. But instead, Crayons submitted a report with utterly no
probative value.

As such, the factual version presented by Pula remains unrefuted, particularly the claim that he was
no longer given work after 13 June 2000 and that he was asked to resign seven (7) days later.
Notably though, even in the face of the foregoing facts, the NLRC still concluded that Pula's
termination was proper. The NLRC was in error.

The termination as upheld by the NLRC was grounded on Article 284 of the Labor Code, which reads:

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 (1/2) 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.

The particular manner by which it is determined that the employee is suffering from the disease of
such character as expressed in Article 284 is in turn spelled out in Section 8, Rule I, Book VI of the
Omnibus Rules Implementing the Labor Code, which provides:

Sec. 8. Disease as a ground for dismissal. - Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his health or to the health of his co-
employees, the employer shall not terminate his employment unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot
be cured within a period of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate the employee but shall ask
the employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health. ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

(Emphasis supplied) cralawlibrary

For a dismissal on the ground of disease to be considered valid, two requisites must
concur: (a) the employee must be suffering from a disease which cannot be cured within
six months and his continued employment is prohibited by law or prejudicial to his health
or to the health of his co-employees; and (b) a certification to that effect must be issued
by a competent public health authority.26 The burden falls upon the employer to establish these
requisites,27 and in the absence of such certification, the dismissal must necessarily be declared
illegal.28 As succinctly stressed in Tan v. NLRC,29 "it is only where there is a prior certification
from a competent public authority that the disease afflicting the employee sought to be
dismissed is of such nature or at such stage that it cannot be cured within six (6) months
even with proper medical treatment that the latter could be validly terminated from his
job."30

Without the required certification, the characterization or even diagnosis of the disease
would primarily be shaped according to the interests of the parties rather than the studied
analysis of the appropriate medical professionals. The requirement of a medical certificate
under Article 284 cannot be dispensed with; otherwise, it would sanction the unilateral
and arbitrary determination by the employer of the gravity or extent of the employee's
illness and thus defeat the public policy in the protection of labor. 31

Labor II – 1
The NLRC's conclusion that no such certification was required since Pula had effectively been
absented due to illness for more than six (6) months is unsupported by jurisprudence and plainly
contrary to the language of the Implementing Rules. The indefensibility of such conclusion is further
heightened by the fact that Pula was able to obtain two different medical certifications attesting to his
fitness to resume work. Assuming that the burden did fall on Pula to establish that he was fit to
return to work, those two medical certifications stand as incontestable in the absence of contrary
evidence of similar nature from Crayons. Then again, the burden lies solely on Crayons to prove that
Pula was unfit to return to work.32 Even absent the certifications favorable to Pula, Crayons would still
be unable to justify his dismissal on the ground of ill health or disease, without the necessary
certificate from a competent public health authority.

All told, we agree with the Court of Appeals that the reinstatement of the Decision of the Labor
Arbiter is in order.

WHEREFORE, the petition is DENIED. Costs against petitioner.

Labor II – 1
 50.) [G.R. No. 169191, June 01 : 2011]

ROMEO VILLARUEL, PETITIONER, VS. YEO HAN GUAN, DOING BUSINESS UNDER THE NAME AND STYLE
YUHANS ENTERPRISES, RESPONDENT.

DECISION

PERALTA, J.:

Assailed in the present petition are the Decision1 and Resolution2 of the Court of Appeals (CA) dated February 16, 2005
and August 2, 2005, respectively, in CA-G.R. SP No. 79105. The CA Decision modified the March 31, 2003 Decision of
the National Labor Relations Commission (NLRC) in NLRC NCR CA 028050-01, while the CA Resolution denied
petitioner's Motion for Reconsideration.

The antecedents of the case are as follows:

On February 15, 1999, herein petitioner filed with the NLRC, National Capital Region, Quezon City a Complaint3 for
payment of separation pay against Yuhans Enterprises.

Subsequently, in his Amended Complaint and Position Paper4 dated December 6, 1999, petitioner alleged that in June
1963, he was employed as a machine operator by Ribonette Manufacturing Company, an enterprise engaged in the
business of manufacturing and selling PVC pipes and is owned and managed by herein respondent Yeo Han Guan.
Over a period of almost twenty (20) years, the company changed its name four times. Starting in 1993 up to the time
of the filing of petitioner's complaint in 1999, the company was operating under the name of Yuhans Enterprises. 
Despite the changes in the company's name, petitioner remained in the employ of respondent. Petitioner further
alleged that on October 5, 1998, he got sick and was confined in a hospital; on December 12, 1998, he reported for
work but was no longer permitted to go back because  of his illness; he asked that respondent allow him to continue
working but be assigned a lighter kind of work but his request was denied; instead, he was offered a sum of
P15,000.00 as his separation pay; however, the said amount corresponds only to the period between 1993 and 1999;
petitioner prayed that he be granted separation pay computed from his first day of employment in June 1963, but
respondent refused. Aside from separation pay, petitioner prayed for the payment of service incentive leave for three
years as well as attorney's fees.

On the other hand, respondent averred in his Position Paper5 that petitioner was hired as machine operator from
March 1, 1993 until he stopped working sometime in February 1999 on the ground that he was suffering from illness;
after his recovery, petitioner was directed to report for work, but he never showed up.  Respondent was later caught
by surprise when petitioner filed the instant case for recovery of separation pay. Respondent claimed that he never
terminated the services of petitioner and that during their mandatory conference, he even told the latter that he could
go back to work anytime but petitioner clearly manifested that he was no longer interested in returning to work and
instead asked for separation pay.

On November 27, 2000, the Labor Arbiter handling the case rendered judgment in favor of petitioner. The dispositive
portion of the Labor Arbiter's Decision reads, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant and against herein
respondent, as follows:

1. Ordering the respondents to pay separation benefits equivalent to one-half (½) month salary per year of service, a
fraction of six months equivalent to one year to herein complainant based on the complainant's length of service
reckoned from June 1963 up to October 1998 as provided under Article 284 of the Labor Code, the same computed by
the Computation and Examination Unit which we hereby adopt and approved (sic) as our own in the amount of
NINETY-ONE THOUSAND FOUR HUNDRED FORTY-FIVE PESOS (P91,445.00);

2. Ordering the respondents to pay service incentive leave equivalent to fifteen days' salary in the amount of THREE
THOUSAND FIFTEEN PESOS (P3,015.00).

All other claims are dismissed for lack of merit.

SO ORDERED.6

Aggrieved, respondent filed an appeal with the NLRC.

On March 31, 2003, the Third Division of the NLRC rendered its Decision7 dismissing respondent's appeal and affirming

Labor II – 1
the Labor Arbiter's Decision.

Respondent filed a Motion for Reconsideration,8 but the same was denied by the NLRC in a Resolution9 dated May 30,
2003.

Respondent then filed with the CA a petition for certiorari under Rule 65 of the Rules of Court.

On February 16, 2005, the CA promulgated its presently assailed Decision disposing as follows:

WHEREFORE, premises considered, the petition is partially GRANTED. The award of separation pay is hereby
DELETED, but the Decision insofar as it awards private respondent [herein petitioner] service incentive leave pay of
three thousand and fifteen pesos (P3,015.00) stands. The NLRC is permanently ENJOINED from partially executing its
Decision dated November 27, 2000 insofar as the award of separation pay is concerned; or if it has already effected
execution, it should order the private respondent to forthwith restitute the same.

SO ORDERED.10

Herein petitioner filed his Motion for Reconsideration11 of the CA Decision, but it was denied by the CA via a
Resolution12 dated August 2, 2005.

Hence, the instant petition based on the following assignment of errors:

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FAILURE TO APPRECIATE THE ADMISSION BY
[PETITIONER] OF THE FACT AND VALIDITY OF HIS TERMINATION BY THE [RESPONDENT].

II

[THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED] IN DENYING [PETITIONER'S] ENTITLEMENT TO

SEPARATION PAY UNDER ARTICLE 284 OF THE LABOR CODE AND UNDER THE OMNIBUS RULES IMPLEMENTING THE
LABOR CODE.

III

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE BURDEN OF PROOF THAT AN
EMPLOYEE IS SUFFERING FROM DISEASE THAT HAS TO BE TERMINATED REST[S] UPON THE EMPLOYER IN ORDER
FOR THE EMPLOYEE TO BE ENTITLED TO SEPARATION PAY.

IV

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE DELETION OF THE AWARD OF
SEPARATION PAY TO THE [PETITIONER].13

The Court finds the petition without merit.

The assigned errors in the instant petition essentially boil down to the question of whether petitioner is entitled to
separation pay under the provisions of the Labor Code, particularly Article 284 thereof, which reads as follows:

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 (½)
month salary for every year of service whichever is greater, a fraction of at least six months being considered as one
(1) whole year.

A plain reading of the abovequoted provision clearly presupposes that it is the employer who terminates the services
of the employee 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. It does not contemplate a situation where it is
the employee who severs his or her employment ties. This is precisely the reason why Section 8,14 Rule 1, Book VI of
the Omnibus Rules Implementing the Labor Code, directs that an employer shall not terminate the services of the
employee unless there is a certification by a competent public health authority that the disease is of such nature or at
such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment.

Labor II – 1
Hence, the pivotal question that should be settled in the present case is whether respondent, in fact, dismissed
petitioner from his employment.

A perusal of the Decisions of the Labor Arbiter and the NLRC would show, however, that there was no discussion with
respect to the abovementioned issue. Both lower tribunals merely concluded that petitioner is entitled to separation
pay under Article 284 of the Labor Code without any explanation. The Court finds no convincing justification, in the
Decision of the Labor Arbiter on why petitioner is entitled to such pay. In the same manner, the NLRC Decision did not
give any rationalization as the gist thereof simply consisted of a quoted portion of the appealed Decision of the Labor
Arbiter.

On the other hand, the Court agrees with the CA in its observation of the following circumstances as proof that
respondent did not terminate petitioner's employment:  first, the only cause of action in petitioner's original complaint
is that he was "offered a very low separation pay"; second, there was no allegation of illegal dismissal, both in
petitioner's original and amended complaints and position paper; and, third, there was no prayer for reinstatement.

In consonance with the above findings, the Court finds that petitioner was the one who initiated the severance of his
employment relations with respondent. It is evident from the various pleadings filed by petitioner that he never
intended to return to his employment with respondent on the ground that his health is failing. Indeed, petitioner did
not ask for reinstatement. In fact, he rejected respondent's offer for him to return to work. This is tantamount to
resignation.

Resignation is defined as the voluntary act of an employee who finds himself in a situation where he believes that
personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to
disassociate himself from his employment.15

It may not be amiss to point out at this juncture that aside from Article 284 of the Labor Code, the award of
separation pay is also authorized in the situations dealt with in Article 28316 of the same Code and under Section 4 (b),
Rule I, Book VI of the Implementing Rules and Regulations of the said Code17 where there is illegal dismissal and
reinstatement is no longer feasible. By way of exception, this Court has allowed grants of separation pay to stand as
"a measure of social justice" where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character.18 However, there is no provision in the Labor Code which grants separation pay
to voluntarily resigning employees. In fact, the rule is that an employee who voluntarily resigns from employment is
not entitled to separation pay, except when it is stipulated in the employment contract or CBA, or it is sanctioned by
established employer practice or policy.19 In the present case, neither the abovementioned provisions of the Labor
Code and its implementing rules and regulations nor the exceptions apply because petitioner was not dismissed from
his employment and there is no evidence to show that payment of separation pay is stipulated in his employment
contract or sanctioned by established practice or policy of herein respondent, his employer.

Since petitioner was not terminated from his employment and, instead, is deemed to have resigned therefrom, he is
not entitled to separation pay under the provisions of the Labor Code.

The foregoing notwithstanding, this Court, in a number of cases, has granted financial assistance to separated
employees as a measure of social and compassionate justice and as an equitable concession. Taking into
consideration the factual circumstances obtaining in the present case, the Court finds that petitioner is entitled to this
kind of assistance.

Citing Eastern Shipping Lines, Inc. v. Sedan,20 this Court, in the more recent case of Eastern Shipping Lines v.
Antonio,21 held:

But we must stress that this Court did allow, in several instances, the grant of financial assistance. In the words of
Justice Sabino de Leon, Jr., now deceased, financial assistance may be allowed as a measure of social justice and
exceptional circumstances, and as an equitable concession. The instant case equally calls for balancing the interests of
the employer with those of the worker, if only to approximate what Justice Laurel calls justice in its secular sense.

In this instance, our attention has been called to the following circumstances: that private respondent joined the
company when he was a young man of 25 years and stayed on until he was 48 years old; that he had given to the
company the best years of his youth, working on board ship for almost 24 years; that in those years there was not a
single report of him transgressing any of the company rules and regulations; that he applied for optional retirement
under the company's non-contributory plan when his daughter died and for his own health reasons; and that it would
appear that he had served the company well, since even the company said that the reason it refused his application
for optional retirement was that it still needed his services; that he denies receiving the telegram asking him to report
back to work; but that considering his age and health, he preferred to stay home rather than risk further working in a
ship at sea.

Labor II – 1
In our view, with these special circumstances, we can call upon the same "social and compassionate justice" cited in
several cases allowing financial assistance. These circumstances indubitably merit equitable concessions, via the
principle of "compassionate justice" for the working class. x x x

In the present case, respondent had been employed with the petitioner for almost twelve (12) years. On February 13,
1996, he suffered from a "fractured left transverse process of fourth lumbar vertebra," while their vessel was at the
port of Yokohama, Japan. After consulting a doctor, he was required to rest for a month. When he was repatriated to
Manila and examined by a company doctor, he was declared fit to continue his work. When he reported for work,
petitioner refused to employ him despite the assurance of its personnel manager. Respondent patiently waited for
more than one year to embark on the vessel as 2nd Engineer, but the position was not given to him, as it was occupied
by another person known to one of the stockholders. Consequently, for having been deprived of continued
employment with petitioner's vessel, respondent opted to apply for optional retirement. In addition, records show that
respondent's seaman's book, as duly noted and signed by the captain of the vessel was marked "Very
Good," and "recommended for hire." Moreover, respondent had no derogatory record on file over his long years of
service with the petitioner.

Considering all of the foregoing and in line with Eastern, the ends of social and compassionate justice would be served
best if respondent will be given some equitable relief. Thus, the award of P100,000.00 to respondent as financial
assistance is deemed equitable under the circumstances.22

While the abovecited cases authorized the grant of financial assistance in lieu of retirement benefits, the Court finds
no cogent reason not to employ the same guiding principle of compassionate justice applied by the Court, taking into
consideration the factual circumstances obtaining in the present case. In this regard, the Court finds credence in
petitioner's contention that he is in the employ of respondent for more than 35 years. In the absence of a substantial
refutation on the part of respondent, the Court agrees with the findings of the Labor Arbiter and the NLRC that
respondent company is not distinct from its predecessors but, in fact, merely continued the operation of the latter
under the same owners and the same business venture. The Court further notes that there is no evidence on record to
show that petitioner has any derogatory record during his long years of service with respondent and that his
employment was severed not by reason of any infraction on his part but because of his failing physical condition. Add
to this the willingness of respondent to give him financial assistance. Hence, based on the foregoing, the Court finds
that the award of P50,000.00 to petitioner as financial assistance is deemed equitable under the circumstances.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals
are AFFIRMED with MODIFICATION by awarding petitioner with financial assistance in the amount of P50,000.00.

Labor II – 1
 51.) G.R. No. 199338 : January 21, 2013

ELEAZAR S. PADILLO,** Petitioner, v. RURAL BANK OF NABUNTURAN, INC. and MARK S.

OROPEZA, Respondent.

DECISION

PERLAS-BERNABE, J.:

Before the Court is a Petition for Review on Certiorari1 assailing the June 28, 2011 Decision2 and
October 27, 2011 Resolution3 of the Cagayan de Oro City Court of Appeals (CA) in CA-G.R. SP No
03669-MIN which revoked and set aside the National Labor Relations Commission's (NLRCs)
Resolutions dated December 29, 20094 and March 31, 20105 and reinstated the Labor Arbiter's (LA's)
Decision dated March 13, 20096 with modification.

The Facts

On October 1, 1977, petitioner, the late Eleazar Padillo (Padillo), was employed by respondent Rural
Bank of Nabunturan, Inc. (Bank) as its SA Bookkeeper. Due to liquidity problems which arose
sometime in 2003, the Bank took out retirement/insurance plans with Philippine American Life and
General Insurance Company (Philam Life) for all its employees in anticipation of its possible closure
and the concomitant severance of its personnel. In this regard, the Bank procured Philam Plan
Certificate of Full Payment No. 88204, Plan Type 02FP10SC, Agreement No. PP98013771 (Philam Life
Plan) in favor of Padillo for a benefit amount of P100,000.00 and which was set to mature on July 11,
2009.7 ?r?l1

On October 14, 2004, respondent Mark S. Oropeza (Oropeza), the President of the Bank, bought
majority shares of stock in the Bank and took over its management which brought about its gradual
rehabilitation. The Banks finances improved and eventually, its liquidity was regained.8
?r?l1

During the latter part of 2007, Padillo suffered a mild stroke due to hypertension which consequently
impaired his ability to effectively pursue his work. In particular, he was diagnosed with Hypertension
S/P CVA (Cerebrovascular Accident) with short term memory loss, the nature of which had been
classified as a total disability.9 On September 10, 2007, he wrote a letter addressed to respondent
Oropeza expressing his intention to avail of an early retirement package. Despite several follow-ups,
his request remained unheeded.

On October 3, 2007, Padillo was separated from employment due to his poor and failing health as
reflected in a Certification dated December 4, 2007 issued by the Bank. Not having received his
claimed retirement benefits, Padillo filed on September 23, 2008 with the NLRC Regional Arbitration
Branch No. XI of Davao City a complaint for the recovery of unpaid retirement benefits. He asserted,
among others, that the Bank had adopted a policy of granting its aging employees early retirement
packages, pointing out that one of his co-employees, Nenita Lusan (Lusan), was accorded retirement
benefits in the amount of P348,672.7210 when she retired at the age of only fifty-three (53). The
Bank and Oropeza (respondents) countered that the claim of Padillo for retirement benefits was not
favorably acted upon for lack of any basis to grant the same.11?r?l1

The LA Ruling

On March 13, 2009, the LA issued a Decision12 dismissing Padillos complaint but directed the Bank to
pay him the amount of P100,000.00 as financial assistance, treated as an advance from the amounts
receivable under the Philam Life Plan.13 It found Padillo disqualified to receive any benefits under
Article 300 (formerly, Article 287) of the Labor Code of the Philippines (Labor Code)14 as he was only
Labor II – 1
fifty-five (55) years old when he resigned, while the law specifically provides for an optional
retirement age of sixty (60) and compulsory retirement age of sixty-five (65). Dissatisfied with the
LAs ruling, Padillo elevated the matter to the NLRC.

The NLRC Ruling

On December 29, 2009, the NLRCs Fifth Division reversed and set aside the LAs ruling and ordered
respondents to pay Padillo the amount of P164,903.70 as separation pay, on top of the P100,000.00
Philam Life Plan benefit.15 Relying on the case of Abaquin Security and Detective Agency, Inc. v.
Atienza (Abaquin),16 the NLRC applied the Labor Code provision on termination on the ground of
disease particularly, Article 297 thereof (formerly, Article 323) holding that while Padillo did resign,
he did so only because of his poor health condition.17 Respondents moved for reconsideration but the
same was denied by the NLRC in its Resolution dated March 31, 2010.18 Aggrieved, respondents filed
a petition for certiorari with the CA.

The CA Ruling

On June 28, 2011, the CA granted respondents petition for certiorari and rendered a decision setting
aside the NLRCs December 29, 2009 and March 31, 2010 Resolutions, thereby reinstating the LAs
March 13, 2009 Decision but with modification. It directed the respondents to pay Padillo the amount
of P50,000.00 as financial assistance exclusive of the P100,000.00 Philam Life Plan benefit which
already matured on July 11, 2009.

The CA held that Padillo could not, absent any agreement with the Bank, receive any retirement
benefits pursuant to Article 300 of the Labor Code considering that he was only fifty-five (55) years
old when he retired.19 It likewise found the evidence insufficient to prove that the Bank has an
existing company policy of granting retirement benefits to its aging employees. Finally, citing the
case of Villaruel v. Yeo Han Guan (Villaruel),20 it pronounced that separation pay on the ground of
disease under Article 297 of the Labor Code should not be given to Padillo because he was the one
who initiated the severance of his employment and that even before September 10, 2007, he already
stopped working due to his poor and failing health. 21 ?r?l1

Nonetheless, Padillo was still awarded the amount of P50,000.00 as financial assistance, in addition
to the benefits accruing under the Philam Life Plan, considering his twenty-nine (29) years of service
with no derogatory record and that he was severed not by reason of any infraction on his part but
because of his failing physical condition.22 ?r?l1

Displeased with the CAs ruling, Padillo (now substituted by his legal heirs due to his death on
February 24, 2012) filed the instant petition contending that the CA erred when it: (a) deviated from
the factual findings of the NLRC; (b) misapplied the case of Villaruel vis-à-vis the factual antecedents
of this case; (c) drastically reduced the computation of financial assistance awarded by the NLRC; (d)
failed to rule on the consequences of respondents bad faith; and (e) reversed and set aside the
NLRCs December 29, 2009 Resolution.23 ?r?l1

The Ruling of the Court

The petition is partly meritorious.

At the outset, it must be maintained that the Labor Code provision on termination on the
ground of disease under Article 29724 does not apply in this case, considering that it was
the petitioner and not the Bank who severed the employment relations. As borne from the
records, the clear import of Padillos September 10, 2007 letter25 and the fact that he stopped
working before the foregoing date and never reported for work even thereafter show that it was
Padillo who voluntarily retired and that he was not terminated by the Bank.
Labor II – 1
As held in Villaruel,26 a precedent which the CA correctly applied, Article 297 of the Labor Code
contemplates a situation where the employer, and not the employee, initiates the termination of
employment on the ground of the latters disease or sickness, viz: cralawlibrary

A plain reading of the [Article 297 of the Labor Code] clearly presupposes that it is the employer who
terminates the services of the employee 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. It does not contemplate a situation where it is the employee who severs his or her
employment ties. This is precisely the reason why Section 8, Rule 1, Book VI of the Omnibus Rules
Implementing the Labor Code, directs that an employer shall not terminate the services of the
employee unless there is a certification by a competent public health authority that the disease is of
such nature or at such a stage that it cannot be cured within a period of six (6) months even with
proper medical treatment. (Emphasis, underscoring and words in brackets supplied)

Thus, given the inapplicability of Article 297 of the Labor Code to the case at bar, it necessarily
follows that petitioners claim for separation pay anchored on such provision must be denied.

Further, it is noteworthy to point out that the NLRCs application of Abaquin27 was gravely misplaced
considering its dissimilar factual milieu with the present case.

To elucidate, a careful reading of Abaquin shows that the Court merely awarded termination pay on
the ground of disease in favor of security guard28 Antonio Jose because he belonged to a "special
class of employees x x x deprived of the right to ventilate demands collectively."29 Thus,
notwithstanding the fact that it was Antonio Jose who voluntarily resigned because of his sickness
and it was not the security agency which terminated his employment, the Court held that Jose
"deserve[d] the full measure of the laws benevolence" and still granted him separation pay because
of his situation, particularly, the fact that he could not have organized with other employees
belonging to the same class for the purpose of bargaining with their employer for greater benefits on
account of the prohibition under the old law.

In this case, it cannot be said that Padillo belonged to the same class of employees prohibited to self-
organize which, at present, consist of: (1) managerial employees;30 and (2) confidential employees
who assist persons who formulate, determine, and effectuate management policies in the field of
labor relations.31 Therefore, absent this equitable peculiarity, termination pay on the ground of
disease under Article 297 of the Labor Code and the Courts ruling in Abaquin should not be applied.

What remains applicable, however, is the Labor Code provision on retirement. In particular, Article
300 of the Labor Code as amended by Republic Act Nos. 764132 and 855833 partly provides: cralawlibrary

Art. 300. 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.

Labor II – 1
Unless the parties provide for broader inclusions, the term one half (1/2) 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. (Emphasis and underscoring supplied)

Simply stated, in the absence of any applicable agreement, an employee must (1) retire when he is
at least sixty (60) years of age and (2) serve at least (5) years in the company to entitle him/her to
a retirement benefit of at least one-half (1/2) month salary for every year of service, with a fraction
of at least six (6) months being considered as one whole year.

Notably, these age and tenure requirements are cumulative and non-compliance with one negates
the employees entitlement to the retirement benefits under Article 300 of the Labor Code altogether.

In this case, it is undisputed that there exists no retirement plan, collective bargaining agreement or
any other equivalent contract between the parties which set out the terms and condition for the
retirement of employees, with the sole exception of the Philam Life Plan which premiums had already
been paid by the Bank.

Neither was it proven that there exists an established company policy of giving early retirement
packages to the Banks aging employees. In the case of Metropolitan Bank and Trust Company v.
National Labor Relations Commission, it has been pronounced that to be considered a company
practice, the giving of the benefits should have been done over a long period of time, and must be
shown to have been consistent and deliberate. 34 In this relation, petitioners bare allegation of the
solitary case of Lusan cannot assuming such fact to be true sufficiently establish that the Banks grant
of an early retirement package to her (Lusan) evolved into an established company practice precisely
because of the palpable lack of the element of consistency. As such, petitioners reliance on the Lusan
incident cannot bolster their claim.

All told, in the absence of any applicable contract or any evolved company policy, Padillo should have
met the age and tenure requirements set forth under Article 300 of the Labor Code to be entitled to
the retirement benefits provided therein. Unfortunately, while Padillo was able to comply with the five
(5) year tenure requirement as he served for twenty-nine (29) years he, however, fell short with
respect to the sixty (60) year age requirement given that he was only fifty-five (55) years old when
he retired. Therefore, without prejudice to the proceeds due under the Philam Life Plan, petitioners
claim for retirement benefits must be denied.

Nevertheless, the Court concurs with the CA that financial assistance should be awarded but at an
increased amount. With a veritable understanding that the award of financial assistance is usually the
final refuge of the laborer, considering as well the supervening length of time which had sadly
overtaken the point of Padillos death an employee who had devoted twenty-nine (29) years of
dedicated service to the Bank the Court, in light of the dictates of social justice, holds that the CAs
financial assistance award should be increased from P50,000.00 to P75,000.00, still exclusive of
the P100,000.00 benefit receivable by the petitioners under the Philam Life Plan which remains
undisputed.

Finally, the Court finds no bad faith in any of respondents actuations as they were within their right,
absent any proof of its abuse, to ignore Padillos misplaced claim for retirement benefits. Respondents
obstinate refusal to accede to Padillos request is precisely justified by the fact that there lies no basis
under any applicable agreement or law which accords the latter the right to demand any retirement
benefits from the Bank. While the Court mindfully notes that damages may be recoverable due to an
abuse of right under Article 2135 in conjunction with Article 19 of the Civil Code of the
Philippines,36 the following elements must, however, obtain: ( 1) there is a legal right or duty; (2)
exercised in bad faith; and (3) for the sole intent of prejudicing or injuring another.37 Records reveal
that none of these elements exists in the case at bar and thus, no damages on account of abuse of
right may he recovered.

Labor II – 1
Neither can the grant of an early retirement package to Lusan show that Padillo was unfairly
discriminated upon. Records show that the same was merely an isolated incident and petitioners
have failed to show that any had faith or motive attended such disparate treatment between Lusan
and Padillo. lrrefragably also, there is no showing that other Bank employees were accorded the
same benefits as that of Lusan which thereby dilutes the soundness of petitioners' imputation of
discrimination and bad faith. Verily, it is axiomatic that held f8ith can never be presumed it must be
proved by clear and convincing evidence.38 This petitioners were unable to prove in the case at bar.

WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the assailed Court of Appeals' Decision
dated June 28, 2011 Decision and October 27, 2011 Resolution in CA-G.R. SP No. 03669-MIN are
hereby MODIFIED, increasing the 8Ward of financial assist8nce of F50,000.00 to P75,000.00,
exclusive of the P 100,000.00 benefit under the Phil am Life Plan.

Labor II – 1
 52.) [G.R. Nos. 178222-23 : September 29, 2010]

MANILA MINING CORP. EMPLOYEES ASSOCIATION-FEDERATION OF FREE WORKERS

CHAPTER, SAMUEL G. ZUÑIGA, IN HIS CAPACITY AS PRESIDENT, PETITIONERS, VS.
MANILA MINING CORP. AND/OR ARTEMIO F. DISINI, PRESIDENT, RENE F. CHANYUNGCO,
(SVP-TREASURER), RODOLFO S. MIRANDA, (VP-CONTROLLER), VIRGILIO MEDINA (VP),
ATTY. CRISANTO MARTINEZ (HRD), NIGEL TAMLYN (RESIDENT MANAGER), BRYAN YAP
(VP), FELIPE YAP (CHAIRMAN OF THE BOARD), AND THE NATIONAL LABOR RELATIONS
COMMISSION (FIRST DIVISION), RESPONDENTS.

DECISION

PEREZ, J.:

This petition for review on certiorari seeks a reversal of the 30 June 2006 Decision[1] of the Court of
Appeals in CA-G.R. SP No. 86073 and its Resolution[2] in the same case dated 30 May 2007.

Respondent Manila Mining Corporation (MMC) is a publicly-listed corporation engaged in large-scale

mining for gold and copper ore. MMC is required by law to maintain a tailings containment facility to
store the waste material generated by its mining operations.  Consequently, MMC constructed several
tailings dams to treat and store its waste materials.  One of these dams was Tailings Pond No. 7 (TP
No. 7), which was constructed in 1993 and was operated under a permit issued by the Department of
Environment and Natural Resources (DENR), through its Environmental Management Bureau (EMB)
in Butuan City, Agusan del Norte.[3]

On 10 January 2000, eleven (11) rank-and-file employees of MMC, who later became complainants
before the labor arbiter, attended the organizational meeting of MMC-Makati Employees Association-
Federation of Free Workers Chapter (Union).  On 3 March 2000, the Union filed with the Department
of Labor and Employment (DOLE) all the requirements for its registration.  The Union acquired its
legitimate registration status on 30 March 2000.  Subsequently, it submitted letters to MMC relating
its intention to bargain collectively. On 11 July 2001, the Union submitted its Collective Bargaining
Agreement (CBA) proposal to MMC.

Upon expiration of the tailings permit on 25 July 2001, DENR-EMB did not issue a permanent permit
due to the inability of MMC to secure an Environmental Compliance Certificate (ECC).  An essential
component of an ECC is social acceptability or the consent of the residents in the community to allow
TP No. 7 to operate, which MMC failed to obtain.[4]  Hence, it was compelled to temporarily shut down
its mining operations, resulting in the temporary lay-off of more than 400 employees in the mine
site.

On 30 July 2001, MMC called for the suspension of negotiations on the CBA with the Union until
resumption of mining operations.[5]

Among the employees laid-off, complainants Samuel Zuñiga, Myrna Maquio, Doroteo Torre, Arsenio
Mark Perez, Edmundo Galvez, Diana Ruth Rellores, Jonathan Araneta, Teresita Lagman, Reynaldo
Anzures, Gerardo Opena, and Edwin Tuazon, together with the Union filed a complaint before the
labor arbiter[6] on even date praying for reinstatement, recognition of the Union as the sole and
exclusive representative of its rank-and-file employees, and payment of moral and exemplary
damages and attorney's fees.[7]

In their Position Paper,[8] complainants challenged the validity of their lay-off on the averment that
MMC was not suffering from business losses. They alleged that MMC did not want to bargain
collectively with the Union, so that instead of submitting their counterproposal to the CBA, MMC
decided to terminate all union officers and active members.  Petitioners questioned the timing of their
lay-off, and alleged that first, there was no showing that cost-cutting measures were taken by MMC;
Labor II – 1
second, no criteria were employed in choosing which employees to lay-off; and third, the individuals
laid-off were those who signed the attendance sheet of the union organizational meeting. Petitioners
likewise claimed that they were denied due process because they were not given a 30-day notice
informing them of the lay-off.  Neither was the DOLE informed of this lay-off, as mandated by law.[9]

Respondents justified the temporary lay-off as bona fide in character and a valid management
prerogative pending the issuance of the permit to continuously operate TP No. 7.

The labor arbiter ruled in favor of MMC and held that the temporary shutdown of the mining
operation, as well as the temporary lay-off of the employees, is valid.[10]

On appeal, the National Labor Relations Commission (NLRC) modified the judgment of the labor
arbiter and ordered the payment of separation pay equivalent to one month pay for every year of
service.  It ratiocinated that the temporary lay-off, which exceeded more than six (6) months, had
the effect of severance of the employer-employee relationship.  The dispositive portion of the
Decision read:

WHEREFORE, the assailed decision is, as it is hereby, Vacated and Set Aside and a new one entered
ordering respondent Manila Mining Corporation to pay the individual complainants their separation
pay computed as follows:

1. Samuel G. [Z]uñiga From Feb. 1, 1995 to  

July 27, 2001 = 7 yrs.  
P14,300/mo.  
P14,300 x 7 yrs. x ½ P 50,050.00 

2. Myrna Maquio From March 1992 to  

July 27, 2001 = 9 yrs.  
P14,000/mo.  
P14,000 x 9 yrs. x ½ P 63,000.00 

3. Doroteo J. Torre From July 1983 to  

July 27, 2001 = 18 yrs.  
P10,000/mo.  
P10,000 x 18 yrs. x ½ P 90,000.00 

4. Arsenio Mark M. Perez From June 1996 to  

July 27, 2001 = 5 yrs.  
P9,500/mo.  
P9,500 x 5 yrs. x ½ P 23,750.00 

5. Edmundo M. Galvez From June 1997 to  

July 27, 2001 = 4 yrs.  
P9,500/mo.  
P9,500 x 4 yrs. x ½ P 19,000.00 
6. Jonathan Araneta From March 1992 to  
July 27, 2001 = 9 yrs.  
P15,500/mo.  
P15,500 x 9 yrs. x ½ P 69,750.00 

7. Teresita D. Lagman From August 1980 to  

July 27, 2001 = 20 yrs.  
P10,900/mo.  
Labor II – 1
 P10,900 x 20 yrs. x ½ P109,000.00 

8. Gerardo Opena From October 1997 to  

July 27, 2001 = 4 yrs.  
P8,250/mo.  
P8,250 x 4 yrs. x ½ P 16,500.00 

9. Edwin Tuazon From August 1994 to  

July 27, 2001 = 8 yrs.  
P7,000/mo.  
P7,000 x 8 yrs. x ½ P 28,000.00 
GRAND TOTAL P469,050.00 

In addition respondent company is hereby ordered to pay  attorney's fees to complainants equivalent
to 10% of the award. [11]

In an Order[12] dated 31 May 2004, the NLRC affirmed its Resolution.

Dissatisfied, both parties separately filed their petitions for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 86073 and CA G.R. SP No. 86163.

The two petitions were consolidated upon motion by MMC in a Resolution dated 3 February 2005.

In its Decision dated 30 June 2006, the Court of Appeals modified the NLRC ruling, thus:

WHEREFORE, the instant petition is partially GRANTED and the challenged Resolution dated August
29, 2003 of public respondent National Labor Relations Commission in NLRC NCR CA No. 033111-(CA
No. 033111-02) is MODIFIED insofar as it holds MMC liable to pay the Union attorney's fees
equivalent to 10% of the award, which portion of the questioned decision is now SET ASIDE.

The  monetary award of separation pay is maintained, but is MODIFIED from one (1) month pay for
every year of service to ONE-HALF (1/2) MONTH PAY for every year of service, a fraction of at least
six (6) months being considered as one (1) whole year.[13]

Both parties filed their respective motions for reconsideration but in a Resolution dated 30 May 2007,
the Court of Appeals denied the motions for lack of merit.[14]

Only the Union elevated the case to this Court via the instant petition for review on certiorari.  The
Union attributes bad faith on the part of MMC in implementing the temporary lay-off resulting in the
complainants' constructive dismissal.  The Union alleges that the failure to obtain a permit to operate
TP No. 7 is largely due to failure on the part of MMC to comply with the DENR-EMB's conditions.[15]

The Union claims that the temporary lay-off was effected without any proper notice to the DOLE as
mandated by Article 283 of the Labor Code.  It further maintains that MMC did not observe the
jurisprudential criteria in the selection of the employees to be laid-off.[16]

The Union insists that MMC is guilty of unfair labor practice when it unilaterally suspended the
negotiation for a CBA.  The Union avers that the lay-off and subsequent termination of complainants
were due to the formation of the union at MMC.[17]

MMC defends the temporary lay-off of the employees as valid and done in the exercise of
management prerogative.  It concedes that upon expiration of the 6-month period, coupled with
losses suffered by MMC, the complainants were constructively dismissed.  However, MMC takes
exception to the application of Article 286 of the Labor Code in that the 6-month period cannot and

Labor II – 1
will not apply to the instant case in order to consider the employees terminated and to support the
payment of separation pay.  MMC explains that the 6-month period does not refer to a situation
where the employer does not have any control over the nature, extent and period of the temporary
suspension of operations.  MMC adds that the suspension of MMC's operations is left primarily to the
discretion of the DENR-EMB, which has the authority to issue MMC's permit to operate TP No. 7.[18]

MMC further submits that where the closure is due to serious business losses, such as in this case
where the aggregate losses amounted to over P880,000,000.00, the law does not impose any
obligation upon the employer to pay separation benefits.[19]

With respect to the charge of unfair labor practice, MMC avers that it merely deferred responding to
the Union's letter-proposal until the resumption of its mining operations.  It went to claim further that
the employment relationship between the parties was suspended at the time the request to bargain
was made.[20]

The issue of MMC's temporary suspension of business operations resulting in the temporary lay-off of
some of its employees was squarely addressed by the labor tribunals and the Court of Appeals.  They
sustained in unison the validity of the temporary suspension, as well as the temporary lay-off.

We agree.  The lay-off is neither illegal nor can it be considered as unfair labor practice.

Despite all efforts exerted by MMC, it did not succeed in obtaining the consent of the residents of the
community where the tailings pond would operate, one of the conditions imposed by DENR-EMB in
granting its application for a permanent permit.  It is precisely MMC's faultless failure to secure a
permit which caused the temporary shutdown of its mining operations.  As aptly put by the Court of
Appeals:

The evidence on record indeed clearly shows that MMC's suspension of its mining operations was
bonafide and the reason for such suspension was supported by substantial evidence.  MMC cannot
conduct mining operations without a tailings disposal system.  For this purpose, MMC operates TP No.
7 under a valid permit from the Department of Environment and Natural Resources (DENR) through
its Environmental Management Bureau (EMB).  In fact, a "Temporary Authority to Construct and
Operate" was issued on January 25, 2001 in favor of MMC valid for a period of six (6) months or until
July 25, 2001.  The NLRC did not dispute MMC's claim that it had timely filed an application for
renewal of its permit to operate TP No. 7 but that the renewal permit was not immediately released
by the DENR-EMB, hence, MMC was compelled to temporarily shutdown its milling and mining
operations.  Here, it is once apparent that the suspension of MMC's mining operations was
not due to its fault nor was it necessitated by financial reasons.  Such suspension was
brought about by the non-issuance of a permit for the continued operation of TP No. 7 without which
MMC cannot resume its milling and mining operations.  x x x.[21] [Emphasis supplied.]

Unfair labor practice cannot be imputed to MMC since, as ruled by the Court of Appeals, the call of
MMC for a suspension of the CBA negotiations cannot be equated to "refusal to bargain."

Article 252 of the Labor Code defines the phrase "duty to bargain collectively," to wit:

ARTICLE 252. Meaning of duty to bargain collectively. - 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.

For a charge of unfair labor practice to prosper, it must be shown that the employer was motivated
Labor II – 1
by ill-will, bad faith or fraud, or was oppressive to labor.  The employer must have acted in a manner
contrary to morals, good customs, or public policy causing social humiliation, wounded feelings or
grave anxiety.  While the law makes it an obligation for the employer and the employees to bargain
collectively with each other, such compulsion does not include the commitment to precipitately
accept or agree to the proposals of the other. All it contemplates is that both parties should approach
the negotiation with an open mind and make reasonable effort to reach a common ground of
agreement.[22]

The Union based its contention on the letter request by MMC for the suspension of the collective
bargaining negotiations until it resumes operations.[23]  Verily, it cannot be said that MMC deliberately
avoided the negotiation.  It merely sought a suspension and in fact, even expressed its willingness to
negotiate once the mining operations resume. There was valid reliance on the suspension of mining
operations for the suspension, in turn, of the CBA negotiation. The Union failed to prove bad faith in
MMC's actuations.

Even as we declare the validity of the lay-off, we cannot say that MMC has no obligation at
all to the laid-off employees. The validity of its act of suspending its operations does not
excuse it from paying separation pay.

MMC seeks refuge in Article 286 which provides:

ART. 286. When employment not deemed terminated.  ─ 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.

Article 286 of the Labor Code allows the bona fide suspension of operations for a period not
exceeding six (6) months.  During the suspension, an employee is not deemed terminated.  As a
matter of fact, the employee is entitled to be reinstated once the employer resumes operations within
the 6-month period.  However, Article 286 is silent with respect to the rights of the employee if the
suspension of operations lasts for more than 6 months. Thus is bred the issue regarding the
responsibility of MMC toward its employees.

MMC subscribes to the view that for purposes of determining employer responsibility, an employment
should likewise not be deemed terminated, should the suspension of operation go beyond six (6)
months as long as the continued suspension is due, as in this case, to a cause beyond the control of
the employer.

We disagree.

As correctly elucidated upon by the Court of Appeals:

We observe that MMC was forced by the circumstances, hence, it resorted to a temporary suspension
of its mining and milling operations.  It is clear that MMC had no choice.  It would be well to reiterate
at this juncture that the reason for such suspension cannot be attributed to DENR-EMB. It is thus,
evident, that the MMC declared temporary suspension of operations to avert further losses.[24]

The decision to suspend operation ultimately lies with the employer, who in its desire to avert
possible financial losses, declares, as here, suspension of operations.

Article 283 of the Labor Code applies to MMC and it provides:

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

Said provision is emphatic that an employee, who was dismissed due to cessation of business
operation, is entitled to the 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.  And it is jurisprudential that separation
pay should also be paid to employees even if the closure or cessation of operations is not due to
losses.[25]

The Court is not impressed with the claim that actual severe financial losses exempt MMC from
paying separation benefits to complainants.  In the first place, MMC did not appeal the decision of the
Court of Appeals which affirmed the NLRC's award of separation pay to complainants.  MMC's failure
had the effect of making the awards final so that MMC could no longer seek any other affirmative
relief.  In the second place, the non-issuance of a permit forced MMC to permanently cease
its business operations, as confirmed by the Court of Appeals.  Under Article 283, the
employer can lawfully close shop anytime as long as cessation of or withdrawal from business
operations is bona fide in character and not impelled by a motive to defeat or circumvent the tenurial
rights of employees, and as long as he pays his employees their termination pay in the amount
corresponding to their length of service.[26]  The cessation of operations, in the case at bar is of such
nature.  It was proven that MMC stopped its operations precisely due to failure to secure permit to
operate a tailings pond. Separation pay must nonetheless be given to the separated employees.

Finding no cogent reason to disturb its ruling, we affirm the Decision of the Court of Appeals.

BASED ON THE FOREGOING, the petition is DENIED.  The Decision of the Court of Appeals
is AFFIRMED. No costs.

Labor II – 1
53.) G.R. No. 177816               August 3, 2011

NIPPON HOUSING PHIL. INC., and/or TADASHI OTA, HOROSHI TAKADA, YUSUHIRO KAWATA, MR.
NOBOYUSHI and JOEL REYES Petitioners,
vs.
MAIAH ANGELA LEYNES, Respondent.

DECISION

PEREZ, J.:

Assailed in this petition for review on certiorari1 filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure is the
23 November 2006 Decision rendered by the Sixteenth Division of the Court of Appeals (CA) in CA-G.R. SP No.
84781,2 the decretal portion of which states:

WHEREFORE, the foregoing considered, the petition is GRANTED and the assailed Decision and Resolution are
REVERSED and SET ASIDE. Accordingly, the Decision of the Labor Arbiter is REINSTATED.

SO ORDERED.3

The Facts

From its original business of providing building maintenance, it appears that petitioner Nippon Housing Philippines,
Inc. (NHPI) ventured into building management, providing such services as handling of the lease of condominium
units, collection of dues and compliance with government regulatory requirements. Having gained the Bay Gardens
Condominium Project (the Project) of the Bay Gardens Condominium Corporation (BGCC) as its first and only
building maintenance client, NHPI hired respondent Maiah Angela Leynes (Leynes) on 26 March 2001 for the
position of Property Manager, with a salary of ₱40,000.00 per month. Tasked with surveying the requirements of the
government and the client for said project, the formulation of house rules and regulations and the preparation of the
annual operating and capital expenditure budget, Leynes was also responsible for the hiring and deployment of
manpower, salary and position determination as well as the assignment of the schedules and responsibilities of
employees.4

On 6 February 2002, Leynes had a misunderstanding with Engr. Honesto Cantuba (Cantuba), the Building Engineer
assigned at the Project, regarding the extension of the latter’s working hours. Aside from instructing the security
guards to bar Engr. Cantuba from entry into the Project and to tell him to report to the NHPI’s main office in Makati,
Leynes also sent a letter dated 8 February 2002 by telefax to Joel Reyes (Reyes), NHPI’s Human Resources
Department (HRD) Head, apprising the latter of said Building Engineer’s supposed insubordination and disrespectful
conduct.5 With Engr. Cantuba’s submission of a reply in turn accusing Leynes of pride, conceit and poor managerial
skills,6 Hiroshi Takada (Takada), NHPI’s Vice President, went on to issue the 12 February 2002 memorandum,
attributing the incident to "simple personal differences" and directing Leynes to allow Engr. Cantuba to report back
for work.7

Disappointed with the foregoing management decision, Leynes submitted to Tadashi Ota, NHPI’s President, a letter
dated 12 February 2002, asking for an emergency leave of absence for the supposed purpose of coordinating with
her lawyer regarding her resignation letter.8 While NHPI offered the Property Manager position to Engr. Carlos Jose
on 13 February 20029 as a consequence Leynes’ signification of her intention to resign, it also appears that Leynes
sent another letter to Reyes by telefax on the same day, expressing her intention to return to work on 15 February
2002 and to call off her planned resignation upon the advice of her lawyer.10 Having subsequently reported back for
work and resumed performance of her assigned functions, Leynes was constrained to send out a 20 February 2002
written protest regarding the verbal information she supposedly received from Reyes that a substitute has already
been hired for her position.11 On 22 February 2002, Leynes was further served by petitioner Yasuhiro Kawata and
Noboyushi Hisada, NHPI’s Senior Manager and Janitorial Manager,12 with a letter and memorandum from Reyes,
relieving her from her position and directing her to report to NHPI’s main office while she was on floating status.13

Labor II – 1
Aggrieved, Leynes lost no time in filing against NHPI and its above-named officers the 22 February 2002 complaint
for illegal dismissal, unpaid salaries, benefits, damages and attorney’s fees docketed before the arbitral level of the
National Labor Relations Commission (NLRC) as NLRC-NCR South Sector Case No. 30-02-01119-02.14 Against
Leynes’ claim that her being relieved from her position without just cause and replacement by one Carlos Jose
amounted to an illegal dismissal from employment,15 NHPI and its officers asserted that the management’s exercise
of the prerogative to put an employee on floating status for a period not exceeding six months was justified in view
of her threatened resignation from her position and BGCC’s request for her replacement.16 During the pendency of
the case, however, Reyes eventually served the Department of Labor and Employment (DOLE)17 and Leynes with
the 8 August 2002 notice terminating her services effective 22 August 2002, on the ground of redundancy or lack of
a posting commensurate to her position at the Project.18 Leynes was offered by NHPI the sum of ₱28,188.16
representing her unpaid wages, proportionate 13th month pay, tax refund and service incentive leave pay (SILP).

On 14 January 2003, Labor Arbiter Manuel Manansala rendered a decision, finding that NHPI’s act of putting
Leynes on floating status was equivalent to termination from employment without just cause and compliance with
the twin requirements of notice and hearing. Likewise finding that NHPI’s officers acted with bad faith in effecting
Leynes’ termination,19 the Labor Arbiter disposed of the case in the following wise:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring respondent Nippon Housing Philippines, Inc. (NHPI) guilty of illegal dismissal for the reasons
above-discussed. Consequently, the aforenamed respondent is hereby directed to reinstate complainant
Maiah Angela Leynes to her former position as Property Manager without loss of seniority rights and with full
backwages from the time of her unjust dismissal up to the time of her actual reinstatement. The backwages
due to complainant Leynes is initially computed at ₱471,844.87 x x x subject to the finality of this Decision.

Be that as it may, on account of strained relationship between the parties brought about by the institution of
the instant case/complaint plus the fact that complainant Leynes occupied a managerial position, it is better
for the parties to be separated. Thus, in lieu of reinstatement, respondent NHPI is hereby directed to pay
complainant Leynes the sum of ₱80,000.00 representing the latter’s initial separation pay subject to the
finality of this Decision x x x.

2. Declaring respondent NHPI and individual respondents Tadashi Ota (President), Hirochi Takada (Vice
President for Finance), Yasuhiro Kawata (Senior Manager), Noboyushi [Hisada] (Janitorial Manager), and
Joel Reyes (HRD Manager) guilty of evident bad faith in effecting the dismissal of complainant Leynes from
the service. Consequently, the aforenamed respondents are hereby directed to pay, jointly and severally,
complainant Leynes the sum of ₱20,000.00 for moral damages and the sum of ₱20,000.00 for exemplary
damages;

3. Directing respondent NHPI to pay complainant Leynes the total sum of ₱56,888.44 representing her
unpaid salary, proportionate 13th month pay, and proportionate service incentive leave pay x x x

4. Directing the aforenamed respondent NHPI to pay complainant Leynes ten (10%) percent attorney’s fees
based on the total monetary award for having been forced to prosecute and/or litigate the instant
case/complaint by hiring the services of legal counsel.

5. Dismissing the other mon[e]y claims and/or charges of complainant Leynes for lack of merit.

SO ORDERED.20

On appeal, the foregoing decision was reversed and set aside in the 30 September 2003 decision rendered by the
NLRC in NLRC NCR CA No. 035229. In ordering the dismissal of the complaint for lack of merit, the NLRC ruled
that NHPI’s placement of Leynes on floating status was necessitated by the client’s contractually guaranteed right to
request for her relief.21 With Leynes’ elevation of the case to the CA on a Rule 65 petition for certiorari,22 the NLRC’s
decision was, however, reversed and set aside in the herein assailed 23 November 2006 decision, upon the
following findings and conclusions: (a) absent showing that there was a bona fide suspension of NHPI’s business
operations, Leynes’ relief from her position – even though requested by the client – was tantamount to a

Labor II – 1
constructive dismissal; (b) the bad faith of NHPI and its officers is evident from the hiring of Engr. Jose as Leynes’
replacement on 13 February 2002 or prior to her being relieved from her position on 22 February 2002; and, (c) the
failure of NHPI and its officers to prove a just cause for Leynes’ termination, the redundancy of her services and
their compliance with the requirements of due process renders them liable for illegal dismissal.23

The motion for reconsideration of the foregoing decision filed by NHPI and its officers24 was denied for lack of merit
in the CA’s 8 May 2007 resolution, hence, this petition.25

The Issues

Petitioners NHPI and Kawata urge the grant of their petition on the following grounds, to wit:

I. THE HONORABLE COURT OF APPEALS’ RULING THAT PETITIONERS’ DECISION TO PLACE

RESPONDENT ON FLOATING STATUS IS TANTAMOUNT TO CONSTRUCTIVE DISMISSAL IS
CONTRARY TO LAW AND SETTLED JURISPRUDENCE.

II. THE HONORABLE COURT OF APPEALS’ DECLARATION THAT NHPI’S DECISION TO REDUNDATE
RESPONDENT IS UNJUSTIFIED, IS CONTRARY TO LAW AND SETTLED JURISPRUDENCE.26

The Court’s Ruling

We find the petition impressed with merit.

Petitioners argue that the CA erred in finding that Leynes was constructively dismissed when she was placed on
floating status prior to her termination from employment on the ground of redundancy. Maintaining that the
employee’s right to security of tenure does not give him a vested right thereto as would deprive the employer of its
prerogative to change his assignment or transfer him to where he will be most useful, petitioners call our attention to
the supposed fact that Leynes was unacceptable to BGCC which had a contractually guaranteed right to ask for her
relief. Rather than outrightly terminating Leynes’ employment as a consequence of her threats to resign from her
position, moreover, petitioners claim that she was validly placed on floating status pursuant to Article 286 of the
Labor Code of the Philippines which provides as follows:

Art. 286. When employment not deemed terminated. – The bona fide suspension of the operation of a business
undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a 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.

Although the CA correctly found that the record is bereft of any showing that Leynes was unacceptable to BGCC,
the evidence the parties adduced a quo clearly indicates that petitioners were not in bad faith when they
placed the former under floating status. Disgruntled by NHPI’s countermanding of her decision to bar Engr.
Cantuba from the Project, Leynes twice signified her intention to resign from her position to Ota on 12 February
2002. Upon receiving the copy of the memorandum issued for Engr. Cantuba’s return to work, Leynes inscribed
thereon the following handwritten note addressed to Ota, "Good Morning! I’m sorry but I would like to report to you
my plan of resigning as your Prop. Manager. Thank You."27 In her application letter for an immediate emergency
leave,28 Leynes also distinctly expressed her dissatisfaction over NHPI’s resolution of her dispute with Engr.
Cantuba and announced her plan of coordinating with her lawyer regarding her resignation letter, to wit:

This is in line with the Management decision re: Return to work order of Mr. Honesto Cantuba at Bay Gardens. I
would like to express my deepest disappointed (sic) for having received this kind of decision from Nippon Housing
Philippines, Inc.

Mr. Ota, I have been working with NHPI, as your Building Property Manager, for almost a year now. I had exerted all
my effort to set-up the Property Management, experienced each and every pain and sacrifice[d] everything before
we were able to get the Bay Gardens project. Mr. Hiro Matsumoto, Hiroshi Takada and Yasuhiro Kawata had
witnessed these things.
Labor II – 1
Given your decision, I am respecting this. The most painful thing for me is that the management did not value my
effort for what I have done to the Company.

I am therefore submitting my letter for emergency leave of absence starting today, while I am still coordinating with
my Lawyer re: my resignation letter.1avvphi1

Thank you for your support.29

In view of the sensitive nature of Leynes’ position and the critical stage of the Project’s business development, NHPI
was constrained to relay the situation to BGCC which, in turn, requested the immediate adoption of remedial
measures from Takada, including the appointment of a new Property Manager for the Project. Upon BGCC’s
recommendation,30 NHPI consequently hired Engr. Jose on 13 February 2002 as Leynes’ replacement.31 Far from
being the indication of bad faith the CA construed the same to be, these factual antecedents suggest that NHPI’s
immediate hiring of Engr. Jose as the new Property Manager for the Project was brought about by Leynes’ own rash
announcement of her intention to resign from her position. Although she subsequently changed her mind and sent
Reyes a letter by telefax on 13 February 2002 announcing the reconsideration of her planned resignation and her
intention to return to work on 15 February 2002,32 Leynes evidently had only herself to blame for precipitately setting
in motion the events which led to NHPI’s hiring of her own replacement.

Acting on Leynes’ 20 February 2002 letter protesting against the hiring of her replacement and reiterating her lack of
intention to resign from her position,33 the record, moreover, shows that NHPI simply placed her on floating status
"until such time that another project could be secured" for her.34 Traditionally invoked by security agencies when
guards are temporarily sidelined from duty while waiting to be transferred or assigned to a new post or
client,35 Article 286 of the Labor Code has been applied to other industries when, as a consequence of the bona fide
suspension of the operation of a business or undertaking, an employer is constrained to put employees on floating
status for a period not exceeding six months.36 In brushing aside respondents’ reliance on said provision to justify
the act of putting Leynes on floating status, the CA ruled that no evidence was adduced to show that there was a
bona fide suspension of NHPI’s business. What said court clearly overlooked, however, is the fact that NHPI
had belatedly ventured into building management and, with BGCC as its only client in said undertaking, had
no other Property Manager position available to Leynes.

Considering that even labor laws discourage intrusion in the employers’ judgment concerning the conduct of their
business, courts often decline to interfere in their legitimate business decisions,37 absent showing of illegality, bad
faith or arbitrariness. Indeed, 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.38 The record shows that Leynes filed the complaint for actual illegal dismissal from which the case originated
on 22 February 2002 or immediately upon being placed on floating status as a consequence of NHPI’s hiring of a
new Property Manager for the Project. The rule is settled, however, that "off-detailing" is not equivalent to
dismissal, so long as such status does not continue beyond a reasonable time and that it is only when such
a "floating status" lasts for more than six months that the employee may be considered to have been
constructively dismissed.39 A complaint for illegal dismissal filed prior to the lapse of said six-month and/or
the actual dismissal of the employee is generally considered as prematurely filed. 40

Viewed in the light of the foregoing factual antecedents, we find that the CA reversibly erred in holding petitioners
liable for constructively dismissing Leynes from her employment. There is said to be constructive dismissal when an
act of clear discrimination, insensitivity or disdain on the part of the employer has become so unbearable as to leave
an employee with no choice but to forego continued employment.41 Constructive dismissal exists where there is
cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer
involving a demotion in rank and a diminution in pay.42 Stated otherwise, it is a dismissal in disguise or an act
amounting to dismissal but made to appear as if it were not.43 In constructive dismissal cases, the employer is,
concededly, charged with the burden of proving that its conduct and action or the transfer of an employee are for
valid and legitimate grounds such as genuine business necessity.44 To our mind, respondents have more than amply
discharged this burden with proof of the circumstances surrounding Engr. Carlos’ employment as Property Manager
for the Project and the consequent unavailability of a similar position for Leynes.

With no other client aside from BGCC for the building management side of its business, we find that NHPI
was acting well within its prerogatives when it eventually terminated Leynes’ services on the ground of
Labor II – 1
redundancy. One of the recognized authorized causes for the termination of employment, 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.45 A redundant position is one rendered superfluous by any number of factors, such as
overhiring of workers, decreased volume of business, dropping of a particular product line previously manufactured
by the company or phasing out of service activity priorly undertaken by the business.46 It has been held that the
exercise of business judgment to characterize an employee’s service as no longer necessary or sustainable is not
subject to discretionary review where, as here, it is exercised there is no showing of violation of the law or
arbitrariness or malice on the part of the employer.47 An employer has no legal obligation to keep more employees
than are necessary for the operation of its business.48

Considering that Leynes was terminated from service upon an authorized cause, we find that the CA likewise erred
in faulting NHPI for supposedly failing to notify said employee of the particular act or omission leveled against her
and the ground/s for which she was dismissed from employment. Where dismissal, however, is for an authorized
cause like redundancy, the employer is, instead, required to serve a written notice of termination on the worker
concerned and the DOLE, at least one month from the intended date thereof.49 Here, NHPI specifically made
Leynes’ termination from service effective 22 August 2002, but only informed said employee of the same on 8
August 200250 and filed with the DOLE the required Establishment Termination Report only on 16 August 2002.51 For
its failure to comply strictly with the 30-day minimum requirement for said notice and effectively violating Leynes’
right to due process, NHPI should be held liable to pay nominal damages in the sum of ₱50,000.00. The penalty
should understandably be stiffer because the dismissal process was initiated by the employer's exercise of its
management prerogative.52

Having been validly terminated on the ground of redundancy, Leynes is entitled to separation pay equivalent to one
month salary for every year of service but not to the backwages adjudicated in her favor by the Labor Arbiter.53 Hired
by NHPI on 26 March 2001 and terminated effective 22 August 2002, Leynes is entitled to a separation pay in the
sum of ₱40,000.00, in addition to her last pay which, taking into consideration her proportionate 13th month pay, tax
refund and SILP, was computed by NHPI at ₱28,188.16.54 For lack of showing of bad faith, malice or arbitrariness
on the part of NHPI, there is, however, no justifiable ground for an award of moral and exemplary damages.55 For
lack of factual or legal bases, we find no cause to award attorney’s fees in favor of Leynes. In the absence of the
same showing insofar as NHPI’s corporate officers are concerned, neither is there cause to hold them jointly and
severally liable for the above-discussed monetary awards.

WHEREFORE, premises considered, the petition is GRANTED and the assailed 23 November 2006 Decision is,
accordingly, REVERSED and SET ASIDE. In lieu thereof, another is entered ordering NHPI to pay Leynes the
following sums: (a) ₱40,000.00 as separation pay; (b) ₱28,188.16 representing her unpaid wages, proportionate
13th month pay, tax refund and SILP; and (c) ₱50,000.00 by way of nominal damages.

Labor II – 1
 54.) G.R. No. 171282, November 27, 2013

SKM ART CRAFT CORPORATION, Petitioner, v. EFREN BAUCA, PATRICIO OLMILLA, ZALDY

ESCALARES, PEDRITO OLMILLA, PEDRO BERAY, DANILO SOLDE, NOEL PALARCA, JULIUS
CESAR MIGUELA, OCTAVIO OBIAS, ARVIN ABINES, RADDY TERENCIO, FE RANIDO, EDNA
MANSUETO, SANDRO RODRIGUEZ, RENATO TANGO, HERMOGENES OBIAS, DOMINGO
LAROCO, DANTE AQUINO, ARMANDO VILLA, ROGELIO DELOS REYES, NOMER MANAGO,
ANTONIO BALUDCAL AND LUDIVICO STA. CLARA, Respondents.

[G.R. NO. 183484]

SKM ART CRAFT CORPORATION, Petitioner, v. EFREN BAUCA, PATRICIO OLMILLA, ZALDY

ESCALARES, PEDRITO OLMILLA, PEDRO BERAY, DANILO SOLDE, NOEL PALARCA, JULIUS
CESAR MIGUELA, OCTAVIO OBIAS, ARVIN ABINES, RADDY TERENCIO, FE RANIDO, EDNA
MANSUETO, SANDRO RODRIGUEZ, RENATO TANGO, HERMOGENES OBIAS, DOMINGO
LAROCO, DANTE AQUINO, ARMANDO VILLA AND ROGELIO DELOS REYES, Respondents.

DECISION

VILLARAMA, JR., J.:

For our resolution is the petition for review on certiorari in G.R. No. 171282 which assails the
November 9, 2005 Decision1 and January 24, 2006 Resolution2 of the Court of Appeals (CA) in CA–
G.R. SP No. 76670.  The petition was earlier consolidated with the petition docketed as G.R. No.
183484, but said petition was denied on October 10, 2011 and said denial has become final on
January 25, 2012, per the entry of judgment3 in G.R. No. 183484.

The facts of the case follow:

The 23 respondents in G.R. No. 171282 were employed by petitioner SKM Art Craft Corporation
which is engaged in the handicraft business.  On April 18, 2000, around 1:12 a.m., a fire occurred at
the inspection and receiving/repair/packing area of petitioner’s premises in Intramuros, Manila.  The
fire investigation report4 stated that the structure and the beach rubber building were totally
damaged.  Also burned were four container vans and a trailer truck.  The estimated damage was P22
million.

On May 8, 2000, petitioner informed respondents that it will suspend its operations for six months,
effective May 9, 2000.5

On May 16, 2000, only eight days after receiving notice of the suspension of petitioner’s
operations, the 23 respondents (and other co–workers) filed a complaint for illegal
dismissal, docketed as NLRC NCR (South) Case No. 30–05–03012–00, 30–05–03028–00 and 30–
05–03045–00.  They alleged that there was discrimination in choosing the workers to be laid off and
that petitioner had discovered that most of them were members of a newly–organized union.6

Petitioner denied the claim of illegal dismissal and said that Article 2867 of the Labor Code allows
the bona fide suspension of a business or undertaking for a period not exceeding six months. 
Petitioner claimed that the fire cost it millions in losses and that it is impossible to resume its normal
operations for a significant period of time.8
cralawlawlibrary

In her Decision9 dated June 29, 2001, the Labor Arbiter ruled that respondents were illegally
dismissed and ordered petitioner to reinstate them and pay them back wages of P59,918.41 each,
the amount being subject to further computation up to the date of their actual reinstatement.  The

Labor II – 1
Labor Arbiter ruled that the fire that burned a part of petitioner’s premises may validate the
suspension of respondents’ employment, but the suspension must not exceed six months.  Since
petitioner failed to recall respondents after the lapse of six months, the Labor Arbiter held that
respondents were illegally dismissed.  The fallo of the Labor Arbiter’s Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal

of [respondents] Efren Bauca, Patricio Olmilla, Zaldy Esc[a]lares, Gaudencio
Gutierrez, Pedrito Olmilla, Pedro B[er]ay, Edwin Penasa, Danilo Solde, Noel P[a]larca, Julius
[Cesar] Miguela, Raul Baray, Octa[v]io Obias, Marcelo Balbuena, Arvin Abines, Raddy O.
[Terencio], Fe Ranido, Edna Mansueto, Lud[i]vico Sta. Clara, Sandro Rodriguez, Antonio
Baludcal, Nomer Manago, Renato Tango, Hermogenes [Obias], Domingo Laroco,
[Wenceslao] Ranido, Dante Aquino, Armando Villa, Ramir Sevilla and Danili Portes, R[o]gelio
[delos] Reyes, Luciano T. Obias, illegal and ordering the [petitioner] SKM Art Craft Corp[oration] to
reinstate them to their former position without loss of seniority rights and privileges and to pay the
following amount representing … back wages.
xxx

1) Basic:
xxx 54,498.73
2) 13th Month Pay: x x x 4,541.56
3) Service Incentive Leave Pay: x x x ____878.12
TOTAL BACK WAGES P59,918.41

The amount of back wages shall be subject to further computation up to the date of their actual
reinstatement.

The [complaint as to] Gaudencio Gutierrez, Danilo Portes, Wenceslao Ranido, Lucino Obias, Edwin
Penaso, Marcelo Balbuena, Raul Beray, Ramir Sevilla [is] dismissed with prejudice in view of the
execution of their Release, Waiver and Quitclaim[s].

SO ORDERED.10

The National Labor Relations Commission (NLRC) set aside the Labor Arbiter’s Decision and ruled that
there was no illegal dismissal.  The NLRC ordered that respondents be reinstated to their former
positions but it deleted the award of back wages.  The NLRC noted that the fire caused millions in
damages to petitioner.  Thus, petitioner’s suspension of operations is valid under Article 286 of
the Labor Code.  It was not meant to remove respondents because they were union members.  The
NLRC added that the illegal dismissal complaint filed by respondents was premature for it was filed
during the six–month period of suspension of operations.  The fallo of the NLRC’s Decision11 dated
July 30, 2002 reads:

WHEREFORE, premises considered, the assailed decision of the Labor Arbiter is hereby SET ASIDE
and a new judgment is hereby rendered ordering the reinstatement of [respondents] to their former
xxx position[s] without payment of backwages.  If reinstatement is no longer feasible for reasons
already stated herein, [petitioner is] hereby ordered to pay the remaining [respondents] with the
exclusion of all those who have already executed quitclaims and release[s], the equivalent of one
month pay for every year of service[,] a fraction of at least six months [being] considered as one
whole year.

The [complaint as to] Nomer Manago, Ludivico Sta. Clara and Antonio Baludcud are dismissed [as
said complainants have already] executed quitclaims and release[s].

The award of proportionate 13th month pay is hereby GRANTED while the award of service incentive

Labor II – 1
leave pay is DISMISSED for lack of basis.

SO ORDERED.12

The NLRC denied the parties’ motions for reconsideration in its Resolution dated January 27, 2003.13

In the assailed Decision, the CA set aside the NLRC Decision and Resolution and reinstated the Labor
Arbiter’s Decision.  The CA considered the merits of the petition for certiorari filed by respondents
and the conflicting findings of the Labor Arbiter and the NLRC as justification for its decision to decide
the case on the merits even if only nine of the respondents had signed the verification and
certification against forum shopping attached to the petition.

The CA ruled that petitioner failed to prove that its suspension of operations is bona fide.  The CA
noted that the proof of alleged losses – the list of items and materials allegedly burned – was not
even certified or signed by petitioner’s accountant or comptroller.  And even if the suspension of
operations is considered bona fide, the CA said that respondents were not reinstated after six
months.  Thus, respondents are deemed to have been illegally dismissed.  The CA also noted that
petitioner’s manifestation that it is willing to admit the respondents if they return to work was
belatedly made after almost one year from the expiration of the suspension of operations.

The CA also held that the NLRC committed grave abuse of discretion in dismissing the complaints of
Nomer Manago, Ludivico Sta. Clara and Antonio Baludcal since the Release, Waiver and Quitclaims
executed by them pertain to another case, NLRC–NCR Case No. 00–02–01495.  In fact, their
quitclaims were executed on July 28, 1999 or long before the fire occurred on April 18, 2000. 
The fallo of the assailed CA Decision reads:

WHEREFORE, premises considered, the Petition is GRANTED.  The Decision dated 30 July 2002 and
Resolution dated 27 January 2003 of the NLRC (Second Division) in NLRC NCR 30–05–03012–00 (CA
No. 029182–01) are REVERSED and SET ASIDE and the Decision dated 29 June 2001 of Labor
Arbiter Dolores M. Peralta–Beley is hereby REINSTATED.  Costs against [petitioner].

SO ORDERED.14

In the assailed Resolution, the CA denied petitioner’s motion for reconsideration.

Petitioner in G.R. No. 171282 raised the following issues:

I.

Whether the CA gravely erred in not summarily dismissing the [CA] petition insofar as xxx Patricio
Olmilla [et al., or those who did not sign the verification and certification against forum shopping,]
are concerned.

II.

Whether the CA gravely erred in invalidating the quitclaims executed by Nomer Manago, Ludivico
Sta. Clara and Antonio Baludcal.

III.

Whether the CA gravely erred in not dismissing the claims of Edna Mansueto, Rogelio Delos Reyes,
Pedro Beray and Raddy Terencio, as they have already executed valid quitclaims in favor of the
petitioner.

IV.

Labor II – 1
Whether the CA gravely erred in reversing and setting aside the [NLRC Decision and Resolution] and
in reinstating the Decision of [the Labor Arbiter.]15

We will address first the first two issues raised by petitioner.  Then, we will resolve the conflicting
rulings on the issue of illegal dismissal and the quitclaims executed by almost all of the respondents.

On the first issue, we disagree with petitioner that the CA erred in giving due course to the petition
filed by respondents even if only nine of them signed the verification and certification against forum
shopping.16   We hold that the verification signed by nine of the respondents substantially complied
with the verification requirement since respondents share a common interest and cause of action in
the case.  The apparent merit of respondents’ CA petition and the conflicting findings of the Labor
Arbiter and the NLRC also justified the CA’s decision to rule on the merits of the case.

The CA aptly noted that in Torres v. Specialized Packaging Development Corporation,17 only two of
the 25 petitioners therein signed the verification and certification against forum shopping.  We said
that the problem is not the lack of a verification, but the adequacy of one executed by only two of
the 25 petitioners.  These two signatories, we added, are unquestionably real parties in interest, who
undoubtedly have sufficient knowledge and belief to swear to the truth of the allegations in the
petition.  This verification is enough assurance that the matters alleged therein have been made in
good faith or are true and correct, not merely speculative.  Hence, we ruled that the requirement of
verification was substantially complied with.  In Altres v. Empleo,18 we also ruled that the verification
requirement is deemed substantially complied with when one who has ample knowledge to swear to
the truth of the allegations in the complaint or petition signs the verification, and when matters
alleged in the petition have been made in good faith or are true and correct, as in this case.

In Altres, we likewise stated the general rule that the certification against forum shopping must be
signed by all the plaintiffs or petitioners in a case; otherwise, those who did not sign will be dropped
as parties to the case.  We also said, however, that under reasonable or justifiable circumstances, as
when all the plaintiffs or petitioners share a common interest and invoke a common cause of action
or defense, as in this case, the signature of only one of them in the certification against forum
shopping substantially complies with the certification requirement.19   In Torres, we also considered
the apparent merits of the case as a special circumstance or compelling reason for allowing the
petition.  We noted the conflicting findings of the NLRC and the Labor Arbiter and held this as ample
justification for the CA’s review of the merits.  We stressed that rules of procedure are established to
secure substantial justice.  Being instruments of the speedy and efficient administration of justice,
they must be used to achieve such end, not to derail it.  Technical requirements may thus be
dispensed with in meritorious appeals.20

On the second issue, we likewise disagree with petitioner.  The CA properly rejected the Release,
Waiver and Quitclaims21 executed by Nomer Manago, Ludivico Sta. Clara and Antonio Baludcal.  Said
quitclaims are irrelevant to this case for they pertain to another case, NLRC–NCR Case No. 00–02–
01495–99, and were executed on July 28, 1999, long before the fire occurred on April 18, 2000.

On the issue of illegal dismissal, while we agree with the NLRC that the suspension of
petitioner’s operation is valid, the Labor Arbiter and the CA are correct that respondents
were illegally dismissed since they were not recalled after six months, after the bona
fide suspension of petitioner’s operations.

It is admitted that petitioner’s premises was burned on April 18, 2000.22   Petitioner also submitted
pictures23 of its premises after the fire, the certification24 by the Barangay Chairman that petitioner’s
factory was burned, and the fire investigation report25 of the Bureau of Fire Protection.  To prove the
damages, petitioner submitted a list26 of burned machines, its inventory27 for April 2000 and the fire
investigation report which stated that the estimated damage is P22 million.

Labor II – 1
We therefore agree with the NLRC that petitioner’s suspension of operations is valid because the fire
caused substantial losses to petitioner and damaged its factory.  On this point, we disagree with the
CA that petitioner failed to prove that its suspension of operations is bona fide.  The list of materials
burned was not the only evidence submitted by petitioner.  It was corroborated by pictures and the
fire investigation report, and they constitute substantial evidence of petitioner’s losses.

Under Article 286 of the Labor Code, the bona fide suspension of the operations of a business or
undertaking for a period not exceeding six months shall not terminate employment.  Article 286
provides,

ART. 286. When employment not deemed terminated. – The bona fide suspension of the
operations 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.

The NLRC correctly noted that the complaint for illegal dismissal filed by respondents was
premature since it was filed only eight days after petitioner announced that it will suspend
its operations for six months.  In Nippon Housing Phil., Inc. v. Leynes,28 we said that a complaint
for illegal dismissal filed prior to the lapse of said six months is generally considered as prematurely
filed.

In this case, however, we agree with the Labor Arbiter and the CA that respondents were
already considered illegally dismissed since petitioner failed to recall them after six
months, when its bona fide suspension of operations lapsed.  We stress that under Article 286
of the Labor Code, the employment will not be deemed terminated if the bona fide
suspension of operations does not exceed six months.  But if the suspension of operations
exceeds six months, the employment will be considered terminated.  In Valdez v. NLRC,29 we
explained:

Under Article 286 of the Labor Code, the bona fide  suspension of the operation of a business or
undertaking for a period not exceeding six months shall not terminate employment.  Consequently,
when the bona fide suspension of the operation of a business or undertaking exceeds six months,
then the employment of the employee shall be deemed terminated.  By the same token and applying
said rule by analogy, if the employee was forced to remain without work or assignment for a period
exceeding six months, then he is in effect constructively dismissed.

In Waterfront Cebu City Hotel v. Jimenez,30 we also said:

Under Art. 286 of the Labor Code, a bona fide suspension of business operations for not more than
six (6) months does not terminate employment.  After six (6) months, the employee may be recalled
to work or be permanently laid off.  In this case, more than six (6) months have elapsed from the
time the Club ceased to operate.  Hence, respondents’ termination became permanent.

Indeed, petitioner’s manifestation31 dated October 2, 2001 that it is willing to admit respondents if

they return to work was belatedly made, almost one year after petitioner’s suspension of operations
expired in November 2000.  We find that petitioner no longer recalled, nor wanted to recall,
respondents after six months.

Petitioner claims now that despite its liberality and gesture of goodwill, none of the respondents
reported for work, and that aside from respondents’ self–serving claims made in the form of
manifestations filed before the Labor Arbiter, nothing on record will show that respondents actually
presented themselves to petitioner for reinstatement.32

Labor II – 1
We seriously doubt petitioner’s liberality or goodwill.  In its manifestation, petitioner even opposed
the motion filed by respondents for execution of the reinstatement aspect of the Labor Arbiter’s
Decision, to wit:

1. [Petitioner] vehemently oppose[s] the Motion for Execution on the Reinstatement

Aspect filed by [respondents]….33

And when the Labor Arbiter granted the motion for execution of the reinstatement aspect of her
decision, petitioner filed a manifestation and motion to quash the writ of execution.34   In this motion
to quash, petitioner claimed that none of the respondents indicated their desire to return to work
either through the office of the Labor Arbiter or through their counsel, by filing the appropriate notice
or manifestation.35   Notably, petitioner wanted the Labor Arbiter to believe that no manifestation was
filed by respondents.  But now, petitioner admits that manifestations were in fact filed by
respondents before the Labor Arbiter.  Petitioner’s lack of candor to the Labor Arbiter is unfair. 
Petitioner’s declaration that it is willing to reinstate respondents also lacks credence because it was in
fact opposing such reinstatement.

Now, petitioner and almost all of the respondents have agreed to settle this case.  To recall our
February 27, 2012 Resolution,36 17 of the 23 respondents have opted to settle the case, to wit:

For the reasons explained below, we deny petitioner’s prayer in its manifestation and motion for
clarification dated January 20, 2012 that we consider these petitions closed and terminated in view of
the amicable settlement entered into by all the parties.

As regards G.R. No. 171282, there are 23 named respondents but only 17 of them, based on our
records, have opted to settle the case.  In this case, we received a manifestation and motion dated
January 16, 2007 filed by Esguerra and Blanco Law Office as counsel for petitioner and Atty. Lily S.
Dayaon–Ireno as counsel for respondents.  Counsels stated that petitioner and 15 respondents have
arrived at a compromise agreement and that the 15 respondents have executed a Release, Waiver
and Quitclaim.  Counsels named these 15 respondents as: (1) Efren Bauca, (2) Noel Palarca, (3)
Patricio Olmilla, (4) Pedrito Olmilla, (5) Zaldy Escalares, (6) Danilo Solde, (7) Julius [Cesar] Miguela,
(8) Fe R. Ranido–Miguela, (9) Hermogenes T. Obias, (10) Antonio Baludcal, (11) Renato Tango, (12)
Armando Villa, (13) Arvin Abines, (14) the heirs of Lud[i]vico Sta. Clara, and (15) Octavio T. Obias. 
Another manifestation and motion dated June 13, 2007 was later filed involving respondent Dante
Aquino.  Thus, in our Resolution dated September 19, 2007 in G.R. No. 171282, we granted the two
motions that the petition be dismissed insofar as the aforenamed 16 respondents are concerned.  On
October 11, 2011, we also considered these cases (G.R. No. 171282 and G.R. No. 183484) closed
and terminated as to respondent Sandro Rodriguez who executed his own Release, Waiver and
Quitclaim.  Nonetheless, nothing prevents petitioner from withdrawing its own petition if it is
convinced that it has settled its dispute with all 23 respondents.  If it decides to do so, we can
consider the petition withdrawn.  And if it turns out that some of the 23 respondents have not agreed
to settle this case, then they can have succor from the favorable judgment of the Court of Appeals.37

In our Resolution dated January 7, 2013,38 we noted that petitioner did not file a motion to withdraw
the petition in G.R. No. 171282.  Hence, we said that our doubt remains regarding the claim that all
23 respondents have entered into an amicable settlement with petitioner.  We repeated that nothing
prevents petitioner from withdrawing its petition in G.R. No. 171282 if it is convinced that it has
settled its dispute with all the respondents.  We added that if it decides to do so, we will willingly
consider the petition withdrawn for then our action will not prejudice any respondent.  Nonetheless,
we gave the parties a chance to prove the claim.  Thus, we suspended for 90 days the period to file
the parties’ memoranda, to wit:

Labor II – 1
WHEREFORE, we DENY the prayer in the joint manifestation and motion dated September 24, 2012
that we consider the petition in G.R. No. 171282 closed and terminated, without prejudice to the
filing by petitioner of an appropriate motion to withdraw its petition in G.R. No. 171282, or to the
submission of verified admissions by all the 23 respondents in G.R. No. 171282 that they have
entered into a settlement agreement with the petitioner or of original copies of their Release, Waiver
and Quitclaim.

Accordingly, the period to file the parties’ memoranda in G.R. No. 171282 is SUSPENDED for 90
days only, counted from receipt of this Resolution.39

Still, no motion to withdraw the petition in G.R. No. 171282 was filed.  Nor did we receive the verified
admissions by the 23 respondents that they have entered into a settlement agreement with
petitioner, or the original copies of their Release, Waiver and Quitclaims.

On October 23, 2013, we dispensed with the filing of the parties’ memoranda and considered the
case submitted for resolution.

On the issue of validity of the Release, Waiver and Quitclaims signed by Edna Mansueto, Rogelio
delos Reyes, Pedro Beray and Raddy O. Terencio, we note that the CA did not rule on the validity of
their quitclaims.  While no original copies of their quitclaims were submitted to us despite our
Resolution dated January 7, 2013, the copies40 attached to the petition are not disowned by
respondents.  And copies of the identification cards of Mansueto, delos Reyes, Beray and Terencio are
attached to these quitclaims which were subscribed and sworn to before NLRC Commissioner Raul T.
Aquino.  To our mind, they have signed these quitclaims voluntarily and we affirm their validity.

In sum, while we agree with the CA in setting aside the NLRC Decision and Resolution and in
reinstating the Labor Arbiter’s Decision, the CA and Labor Arbiter’s Decisions will now be subject to
the settlement agreements entered into by petitioner and almost all of the respondents.

WHEREFORE, we DENY the petition in G.R. No. 171282 and AFFIRM the Decision dated November
9, 2005 and Resolution dated January 24, 2006 of the Court of Appeals in CA–G.R. SP No. 76670,
subject to the settlement agreements and quitclaims signed by almost all of the respondents.

Labor II – 1
 55.) G.R. No. 198538, September 29, 2014

EXOCET SECURITY AND ALLIED SERVICES CORPORATION AND/OR MA. TERESA

MARCELO, Petitioner, v. ARMANDO D. SERRANO, Respondent.

DECISION

VELASCO JR., J.:

Nature of the Case

This is a Petition for Review on Certiorari under Rule 45 seeking to reverse and set aside the March
31, 2011 Decision1 and September 7, 2011 Resolution of the Court of Appeals (CA) in CA-G.R. SP No.
113251, which ordered petitioner to pay respondent separation pay and backwages for having been
illegally dismissed from employment.

The Antecedent Facts

Petitioner Exocet Security and Allied Services Corporation (Exocet) is engaged in the provision of
security personnel to its various clients or principals. By virtue of its contract with JG Summit
Holdings Inc. (JG Summit), Exocet assigned respondent Armando D. Serrano (Serrano) on
September 24, 1994 as “close-in”security personnel for one of JG Summit’s corporate officers,
Johnson Robert L. Go.2 After eight years, Serrano was re-assigned as close-in security for Lance
Gokongwei, and then to his wife, Mary Joyce Gokongwei.3 As close-in security, records show that
Serrano was receiving a monthly salary of P11,274.30.4 cralawlawlibrary

On August 15, 2006, Serrano was relieved by JG Summit from his duties. For more than six months
after he reported back to Exocet, Serrano was without any reassignment. On March 15,
2007, Serrano filed a complaint for illegal dismissal against Exocet with the National Labor Relations
Commission (NLRC).5 cralawlawlibrary

For its defense, Exocet denied dismissing Serrano alleging that, after August 15, 2006, Serrano no
longer reported for duty assignment as VIP security for JG Summit, and that on September 2006, he
was demanding for VIP Security detail to another client. However, since, at that time, Exocet did not
have clients in need of VIP security assignment, Serrano was temporarily assigned to general
security service.6 Exocet maintained that it was Serrano who declined the assignment on the ground
that he is not used to being a regular security guard. Serrano, Exocet added, even refused to report
for immediate duty, as he was not given a VIP security assignment.7 cralawlawlibrary

Considering the parties’ respective allegations, the Labor Arbiter ruled that Serrano was illegally
dismissed. In its June 30, 2008 Decision, the Labor Arbiter found that Serrano, while not actually
dismissed, was placed on a floating status for more than six months and so, was deemed
constructively dismissed. Thus, the Labor Arbiter ordered Exocet to pay Serrano separation
pay,8 viz:chanRoblesvirtualLawlibrary

Since complainant prayed for separation pay in lieu of reinstatement, he is entitled to the same,
computed below as follows: chanRoblesvirtualLawlibrary

“SEPARATION PAY: September 24, 1994 –August 15, 2006 = 12 years.P300.00 x 13 x 12 years
= P46,800.00”

WHEREFORE, premises considered, respondent corporation is hereby directed to pay complainant’s

monetary awards as computed above.

Labor II – 1
SO ORDERED.9 chanrobleslaw

Not satisfied with the award, Serrano appealed the Labor Arbiter’s Decision to the NLRC. In its March
5, 2009 Resolution, the NLRC initially affirmed the ruling of the Labor Arbiter, but modified the
monetary award to include the payment of backwages for six months that Serrano was not given a
security assignment. The dispositive portion of the March 5, 2009 Resolution reads: chanRoblesvirtualLawlibrary

ACCORDINGLY, premises considered, the decision appealed from is hereby modified. The
respondents are hereby ordered to pay complainant separation pay plus backwages computed from
[the] date he effectively became dismissed from service which is after the lapse of the 6 month
period up to the issuance of this decision, the computation of which is attached as Annex A.

All others are hereby affirmed.10

Acting on Exocet’s motion for reconsideration, however, the NLRC, in its September 2, 2009
Resolution, further modified its earlier decision by removing the award for backwages.11 The NLRC
deviated from its earlier findings and ruled that Serrano was not constructively dismissed, as his
termination was due to his own fault, stubborn refusal, and deliberate failure to accept a re-
assignment.12 Nevertheless, the NLRC proceeded to affirm in toto the decision of the Labor Arbiter on
the ground that Exocet did not interpose the appeal. The fallo of the NLRC’s September 2, 2009
Resolution reads: chanRoblesvirtualLawlibrary

WHEREFORE, the motion is GRANTED and the assailed decision is RECONSIDERED and SET ASIDE.
Consequently, the decision of the Labor Arbiter is hereby upheld in toto.

SO ORDERED.13 chanrobleslaw

On January 22, 2010, the NLRC issued another Resolution denying Serrano’s motion for
reconsideration.14 Hence, not satisfied with the NLRC’s ruling, Serrano filed a petition
for certiorari with the CA assailing the September 2, 2009 Resolution of the NLRC. Serrano insisted
that he was constructively dismissed and, thus, is entitled to reinstatement without loss of seniority
rights and to full backwages from the time of the alleged dismissal up to the time of the finality of
the Decision.

On March 31, 2011, the appellate court rendered a Decision in Serrano’s favor, reversing and setting
aside the NLRC’s September 2, 2009 Resolution and ordering Exocet to pay Serrano separation pay
and backwages.15 In so ruling, the CA found that Serrano was constructively dismissed, as Exocet
failed to re-assign him within six months after placing him on “floating status.”16 The appellate court
disposed of Serrano’s appeal as follows: chanRoblesvirtualLawlibrary

WHEREFORE, the assailed Resolutions promulgated on September 2, 2009 and January 22, 2010
issued by the NLRC LAC No. 09-003163-08 (NLRC NCR No. 00-03-02423-07) are REVERSED and SET
ASIDE, and in lieu thereof, a new judgment is ENTERED ordering respondent company to pay
petitioner his separation pay and backwages.

Upon finality of this decision, the Research and Computation Unit of public respondent NLRC is
DIRECTED to recompute the monetary benefits due to petitioner in accordance with this decision.

SO ORDERED.

Petitioner Exocet’s Motion for Reconsideration was denied by the appellate court in its September 7,
2011 Resolution.17   Hence, Exocet filed this petition.

The Issue

Labor II – 1
The sole issue for resolution is whether or not Serrano was constructively dismissed.

The Court’s Ruling

The petition has merit.

The crux of the controversy lies on the consequence of the lapse of the six-month period,
during which respondent Serrano was placed on a “floating status” and petitioner Exocet
could not assign him to a position he wants. The appellate court was of the view that Serrano
was constructively dismissed. The Court maintains otherwise.

While there is no specific provision in the Labor Code which governs the “floating status” or
temporary “off-detail” of security guards employed by private security agencies, this situation was
considered by this Court in several cases as a form of temporary retrenchment or lay-off.18 The
concept has been defined as that period of time when security guards are in between assignments or
when they are made to wait after being relieved from a previous post until they are transferred to a
new one.19 As pointed out by the CA, it takes place when the security agency’s clients decide not to
renew their contracts with the agency, resulting in a situation where the available posts under its
existing contracts are less than the number of guards in its roster. It also happens in instances where
contracts for security services stipulate that the client may request the agency for the replacement of
the guards assigned to it, even for want of cause, such that the replaced security guard may be
placed on temporary “off-detail” if there are no available posts under the agency’s existing
contracts.20 cralawlawlibrary

As the circumstance is generally outside the control of the security agency or the employer, the Court
has ruled that when a security guard is placed on a “floating status,” he or she does not
receive any salary or financial benefit provided by law. Pido v. National Labor Relations
Commission21 explains why: chanRoblesvirtualLawlibrary

Verily, a floating status requires the dire exigency of the employer’s bona fide suspension of
operation of a business or undertaking.  In security services, this happens when the security agency’s
clients which do not renew their contracts are more than those that do and the new ones that the
agency gets. Also, in instances when contracts for security services stipulate that the client
may request the agency for the replacement of the guards assigned to it even for want of
cause, the replaced security guard may be placed on temporary “off-detail” if there are no
available posts under respondent’s existing contracts.

When a security guard is placed on a “floating status,” he does not receive any salary or
financial benefit provided by law. Due to the grim economic consequences to the employee, the
employer should bear the burden of proving that there are no posts available to which the employee
temporarily out of work can be assigned.” (emphasis supplied)

It must be emphasized, however, that although placing a security guard on “floating status” or a
temporary “off-detail” is considered a temporary retrenchment measure, there is similarly no
provision in the Labor Code which treats of a temporary retrenchment or lay-off. Neither is there
any provision which provides for its requisites or its duration.22 Nevertheless, since an
employee cannot be laid-off indefinitely, the Court has applied Article 292 (previously Article 286) of
the Labor Code by analogy to set the specific period of temporary lay-off to a maximum of six (6)
months. The said provision states: chanRoblesvirtualLawlibrary

ART. 292. When employment not deemed terminated. - 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

Labor II – 1
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.

Thus, this Court has held, citing Sebuguero v. NLRC,23 that the placement of the employee on a
floating status should not last for more than six months. After six months, the employee should be
recalled for work, or for a new assignment; otherwise, he is deemed terminated.

There is no specific provision of law which treats of a temporary retrenchment or lay-off and provides
for the requisites in effecting it or a period or duration therefor. These employees cannot forever
be temporarily laid-off. To remedy this situation or fill the hiatus, Article 286 [now 292]
may be applied but only by analogy to set a specific period that employees may remain
temporarily laid-off or in floating status. Six months is the period set by law that the operation
of a business or undertaking may be suspended thereby suspending the employment of the
employees concerned. The temporary lay-off wherein the employees likewise cease to work should
also not last longer than six months. After six months, the employees should either be recalled to
work or permanently retrenched following the requirements of the law, and that failing to comply
with this would be tantamount to dismissing the employees and the employer would thus be liable for
such dismissal.

In accordance with the aforementioned ruling,the Department of Labor and Employment (DOLE)
issued Department Order No. 14, Series of 2001 (DO 14-01), entitled “Guidelines Governing the
Employment and Working Conditions of Security Guards and Similar Personnel in the Private Security
Industry,”Section 6.5,in relation to Sec. 9.3, of which states that the lack of service assignment for a
continuous period of six (6) months is an authorized cause for the termination of the employee, who
is then entitled to a separation pay equivalent to half month pay for every year of service, viz: chanRoblesvirtualLawlibrary

6.5 Other Mandatory Benefits. In appropriate cases, security guards/similar personnel are entitled to
the mandatory benefits as listed below, although the same may not be included in the monthly cost
distribution in the contracts, except the required premiums form their coverage:

a. Maternity benefit as provided under SS Law;

b. Separation pay if the termination of employment is for authorized cause as provided
by law and as enumerated below: chanRoblesvirtualLawlibrary

Half-Month Pay Per Year of Service, but in no case less than One Month Pay if
separation pay is due to:
chanRoblesvirtualLawlibrary

0. Retrenchment or reduction of personnel effected by management to prevent

serious losses;
1. Closure or cessation of operation of an establishment not due to serious losses or
financial reverses;
2. Illness or disease not curable within a period of 6 months and continued
employment is prohibited by law or prejudicial to the employee’s health or that
of co-employees;
3. Lack of service assignment for a continuous period of 6 months.

xxxx

9.3 Reserved Status – A security guard or similar personnel may be placed in a work pool or on
reserved status due to lack of service assignments after the expiration or termination of the
service contract with the principal where he/she or assigned or due to temporary suspension of
agency operations.

Labor II – 1
No security guard or personnel can be placed in a work pool or on reserved status in any of the
following situations: a) after expiration of a service contract if there are other principals where
he/she can be assigned; b) as a measure to constructively dismiss the security guard; and c) as an
act of retaliation for filing complaints against the employer on violations of labor laws, among others.

If after the period of 6 months, the security agency/employer cannot provide work or give
assignment to the reserved security guard, the latter can be dismissed from service and
shall be entitled to separation pay as described in subsection 6.5.

Security guards on reserved status who accept employment in other security agencies or
employers before the end of the above six-month period may not be given separation pay.
(emphasis supplied)

In Reyes v. RP Guardians Security Agency, Inc.,24 the Court explained the application of DO 14-01 to
security agencies and their security guards, and the procedural requirements with which the security
agencies must comply: chanRoblesvirtualLawlibrary

Furthermore, the entitlement of the dismissed employee to separation pay of one month for every
year of service should not be confused with Section 6.5 (4) of DOLE D.O. No. 14 which grants a
separation pay of one half month for every year service xxx.

xxxx

The said provision contemplates a situation where a security guard is removed for
authorized causes such as when the security agency experiences a surplus of security
guards brought about by lack of clients. In such a case, the security agency has the option
to resort to retrenchment upon compliance with the procedural requirements of “two-
notice rule” set forth in the Labor Code. (emphasis supplied)

Thus, to validly terminate a security guard for lack of service assignment for a continuous period of
six months under Secs. 6.5 and 9.3 of DO 14-01, the security agency must comply with the
provisions of Article 289 (previously Art. 283) of the Labor Code,25 which mandates that a written
notice should be served on the employee on temporary off-detail or floating status and to the DOLE
one (1) month before the intended date of termination. This is also clear in Sec. 9.2 of DO 14-01
which provides: chanRoblesvirtualLawlibrary

9.2 Notice of Termination - In case of termination of employment due to authorized causes provided
in Article 283 and 284 of the Labor Code and in the succeeding subsection, the employer shall serve
a written notice on the security guard/personnel and the DOLE at least one (1) month before the
intended date thereof.

In every case, the Court has declared that the burden of proving that there are no posts available to
which the security guard may be assigned rests on the employer. We ruled in Nationwide Security
and Allied Services Inc. v. Valderama:26 cralawlawlibrary

In cases involving security guards, a relief and transfer order in itself does not sever employment
relationship between a security guard and his agency. An employee has the right to security of
tenure, but this does not give him a vested right to his position as would deprive the company of its
prerogative to change his assignment or transfer him where his service, as security guard, will be
most beneficial to the client. Temporary “off-detail” or the period of time security guards are made to
wait until they are transferred or assigned to a new post or client does not constitute constructive
dismissal, so long as such status does not continue beyond six months.

The onus of proving that there is no post available to which the security guard can be
assigned rests on the employer x x x. (emphasis supplied)

Labor II – 1
It cannot, therefore, be gainsaid that the right of security guards to security of tenure is safeguarded
by administrative issuances and jurisprudence, in parallel with the mandate of the Labor Code and
the Constitution to protect labor and the working people. Nonetheless, while the Court has
recognized the security guards’ right to security of tenure under the “floating status” rule, the Court
has similarly acknowledged the management prerogative of security agencies to transfer
security guards when necessary in conducting its business, provided it is done in good
faith. In Megaforce Security and Allied Services, Inc. v. Lactao,27 the Court explained: chanRoblesvirtualLawlibrary

In cases involving security guards, a relief and transfer order in itself does not sever employment
relationship between a security guard and his agency. An employee has the right to security of
tenure, but this 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 his service, as
security guard, will be most beneficial to the client. Temporary “off-detail” or the period of
time security guards are made to wait until they are transferred or assigned to a new post
or client does not constitute constructive dismissal as their assignments primarily depend
on the contracts entered into by the security agencies with third parties. Indeed, the Court
has repeatedly recognized that “off-detailing” is not equivalent to dismissal, so long as such
status does not continue beyond a reasonable time; when such a “floating status” lasts for
more than six months, the employee may be considered to have been constructively dismissed.
(emphasis supplied)

In the controversy now before the Court, there is no question that the security guard, Serrano, was
placed on floating status after his relief from his post as a VIP security by his security agency’s client.
Yet, there is no showing that his security agency, petitioner Exocet, acted in bad faith when it placed
Serrano on such floating status. What is more, the present case is not a situation where Exocet
did not recall Serrano to work within the six-month period as required by law and
jurisprudence. Exocet did, in fact, make an offer to Serrano to go back to work. It is just
that the assignment—although it does not involve a demotion in rank or diminution in salary, pay,
benefits or privileges—was not the security detail desired by Serrano.

Clearly,Serrano’s lack of assignment for more than six months cannot be attributed to petitioner
Exocet. On the contrary, records show that, as early as September 2006, or one month after Serrano
was relieved as a VIP security, Exocet had already offered Serrano a position in the general security
service because there were no available clients requiring positions for VIP security. Notably,
even though the new assignment does not involve a demotion in rank or diminution in salary, pay, or
benefits, Serrano declined the position because it was not the post that suited his
preference, as he insisted on being a VIP Security.

In fact, even during the meeting with the Labor Arbiter, Exocet offered a position in the general
security only to be rebuffed by Serrano.28 It was as if Serrano obliged Exocet to look for a client in
need of a VIP security—the availability of which is obviously not within Exocet’s control,and by
nature, difficult to procure as these contracts depend on the trust and confidence of the client or
principal on the security guard. As aptly found by the NLRC: chanRoblesvirtualLawlibrary

Anent the client’s action, respondent agency had no recourse but to assign complainant to a new
posting. However, complainant, having had a taste of VIP detail and perhaps the perks that come
with such kind of assignment, vaingloriously assumed that he can only be assigned to VIP close-in
posting and that he would accept nothing less. In fact, after his relief and tardy appearance at
respondent’s office, he was offered re-assignment albeit to general security services which
he refused. Respondents clearly made known to him that as of the moment no VIP detail
was vacant or sought by other clients but complainant was adamant in his refusal.
Complainant even had the nerve to assert that he just be informed if there is already a VIP
detail available for him and that he will just report for re-assignment by then. It is also well
to note that to these allegations, complainant made no denial.29 (emphasis supplied)
Labor II – 1
To repeat for emphasis, the security guard’s right to security of tenure does not give him a vested
right to the position as would deprive the company of its prerogative to change the assignment of, or
transfer the security guard to, a station where his services would be most beneficial to the client.
Indeed, an employer has the right to transfer or assign its employees from one office or area of
operation to another, or in pursuit of its legitimate business interest, provided there is no demotion in
rank or diminution of salary, benefits, and other privileges, and the transfer is not motivated by
discrimination or bad faith, or effected as a form of punishment or demotion without sufficient
cause.30cralawlawlibrary

Thus, it is manifestly unfair and unacceptable to immediately declare the mere lapse of the six-month
period of floating status as a case of constructive dismissal, without looking into the peculiar
circumstances that resulted in the security guard’s failure to assume another post. This is especially
true in the present case where the security guard’s own refusal to accept a non-VIP detail was the
reason that he was not given an assignment within the six-month period. The security agency,
Exocet, should not then be held liable.

Indeed, from the facts presented, Serrano was guilty of wilful disobedience to a lawful order of his
employer in connection with his work, which is a just cause for his termination under Art.288
(previously Art. 282)of the Labor Code.31 Nonetheless, Exocet did not take Serrano’s wilful
disobedience against him. Hence, Exocet is considered to have waived its right to terminate Serrano
on such ground.

In this factual milieu, since respondent Serrano was not actually or constructively dismissed from his
employment by petitioner Exocet, it is best that petitioner Exocet direct him to report for work, if any
security assignment is still available to him. If respondent Serrano still refuses to be assigned to any
available guard position, he shall be deemed to have abandoned his employment with petitioner.

If no security assignment is available for respondent, petitioner Exocet should comply with the
requirements of DO 14-01, in relation to Art. 289 of the Labor Code, and serve a written notice on
Serrano and the DOLE one (1) month before the intended date of termination, and pay Serrano
separation pay equivalent to half month pay for every year of his actual service.

As a final note, the Court reiterates that it stands to promote the welfare of employees and continue
to apply the mantle of protectionism in their favor. Thus, employees, like security guards, should not
be laid-off for an indefinite period of time. However, We hold that a similar protection should be
given to employers who, in good faith, have exerted efforts to comply with the requirements of the
law by offering reasonable work and appropriate assignments during the six-month period. After all,
the constitutional policy of providing full protection to labor is not intended to oppress or destroy
management, and 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.32
cralawlawlibrary

IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The March 31, 2011 Decision and
September 7, 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 113251 are
hereby REVERSED and SET ASIDE.  Moreover, the March 5, 2009 and September 2, 2009
Resolutions of the National Labor Relations Commission in NLRC LAC No. 09-003163-08 (NLRC NCR
No. 00-03-02423-07), as well as the June 30, 2008 Decision of the Labor Arbiter in NLRC-NCR-00-
03-02423-07, are also REVERSED and SET ASIDE.

Petitioner Exocet Security and Allied Services Corporation is neither guilty of illegal dismissal nor
constructive dismissal. Petitioner is hereby ORDERED to look for a security assignment for
respondent within a period of thirty (30) days from finality of judgment. If one is available, petitioner
is ordered to notify respondent Armando D. Serrano to report to such available guard position within
ten (10) days from notice.  If respondent fails to report for work within said time period, he shall be
deemed to have abandoned his employment with petitioner. In such case, respondent Serrano
Labor II – 1
is not entitled to any backwages, separation pay, or similar benefits.

If no security assignment is available for respondent within a period of thirty (30) days from finality
of judgment, petitioner Exocet should comply with the requirements of DOLE Department Order No.
14, Series of 2001, in relation to Art. 289 of the Labor Code, and serve a written notice on
respondent Serrano and the DOLE one (1) month before the intended date of termination; and pay
Serrano separation pay equivalent to half month pay for every year of his service.

Labor II – 1
 56.) G.R. No. 221085, June 19, 2017

RAVENGAR G. IBON, Petitioner, v. GENGHIS KHAN SECURITY SERVICES AND/OR MARIETTA

VALLESPIN, Respondents.

DECISION

MENDOZA, J.:

This petition for review on certiorari seeks to reverse and set aside the July 3, 2015 Decision1 and
October 13, 2015 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 125948, which affirmed
the April 24, 2012 Decision3 and the May 22, 2012 Resolution4 of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 01-000503-12(8)/NLRC NCR CN. 05-07463-11, a case for
illegal dismissal.

Ravengar G. Ibon (petitioner) was employed as a security guard by Genghis Khan Security Services
(respondent) sometime in June 2008. He was initially assigned to a certain Mr. Solis in New Manila,
Quezon City. In July 2008, he was transferred to the 5th Avenue Condominium in Fort Bonifacio,
Taguig City, in September 2008 and was posted there until May 2009.5

In June 2009, petitioner was transferred to the Aspen Tower Condominium until his last duty on
October 4, 2010. Thereafter, respondent promised to provide him a new assignment, which,
however, did not happen.6

On May 10, 2011, petitioner filed a Complaint7 against respondent for illegal dismissal, with claims
for underpayment of wages, holiday and rest day premiums, service incentive leave pay, non-
payment of separation pay, and reimbursement of illegal deductions.8 He alleged that he was no
longer assigned to a new post after his last duty on October 4, 2010; that he was merely receiving a
daily salary of P384.00; and that in the course of his employment, respondent would deduct P200.00
per month as cash bond from September 2008 until September 2010.9

For his part, respondent denied that petitioner was placed on a floating status for more than six (6)
months. It claimed that he was suspended on October 4, 2010 for sleeping on the job. Respondent
added that petitioner was endorsed to another client for re-assignment, which the latter refused
because his license was due for renewal. Since then, petitioner failed to report for work.10

Sometime in November 2010, petitioner went to respondent's office to claim his 13th month pay, but
the same was not given to him because it was not yet due. Respondent then received a call from the
Department of Labor and Employment (DOLE) regarding petitioner's claim for 13th month pay, which
was later on settled during the proceedings before the DOLE. It then sent letters to petitioner
requiring him to report for work, but he did not show up. Hence, respondent was surprised to receive
summons regarding the complaint for illegal dismissal.11

The LA Ruling

In its November 29, 2011 Decision,12 the Labor Arbiter (LA) declared petitioner to have been
constructively dismissed because of respondent's failure to put him on duty for more than six (6)
months. It ordered respondent to pay petitioner backwages from May 5, 2011, the effective date of
the constructive dismissal. The LA also granted petitioner's prayer for separation pay in view of the
parties' strained relationship, as well as his claims for wage differential, service incentive leave pay
and reimbursement of his cash bond.

Aggrieved, respondent appealed to the NLRC.

Labor II – 1
The NLRC Ruling

In its April 24, 2012 Decision, the NLRC reversed and set aside the decision of the LA. It opined that
there was no constructive dismissal because respondent did not intend to indefinitely place petitioner
on a floating status. The NLRC noted that respondent sent letters to petitioner requiring him to report
back to work within the six-month period. It added that respondent offered to reinstate petitioner
during the proceedings before the LA, but the said offer was rejected by the latter.

Further, the NLRC pointed out that even if the letters were not received by petitioner, respondent's
act of sending them showed that it did not wish to sever the employer-employee relationship. It,
nevertheless, sustained the money claims awarded by the LA.

Petitioner moved for reconsideration, but his motion was denied by the NLRC in a Resolution dated
May 22, 2012.

Undaunted, petitioner filed a petition for certiorari before the CA.

The CA Ruling

In its assailed Decision, dated July 3, 2015, the CA affirmed the NLRC finding that petitioner was not
constructively dismissed. It wrote that the evidence on record showed that petitioner was required to
report back to work and that on October 21, 2010, he was offered a new assignment, which he
refused. The CA concluded that there was no dismissal to speak of as it was petitioner who
manifested his lack of interest in going back to work.

Hence, this petition raising the following:

ISSUES

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE
NLRC THAT THE PETITIONER WAS NOT ILLEGALLY DISMISSED FROM EMPLOYMENT; AND

II

WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE RULING OF THE
NLRC THAT THE PETITIONER IS NOT ENTITLED TO HIS MONETARY CLAIMS DUE TO
ILLEGAL DISMISSAL.13
Petitioner argues that he did not receive the letters requiring him to report back to work; that a
perusal of the letters revealed that the same did not indicate a specific assignment; that respondent
had no intention to reinstate him considering that he was placed on a floating status for a long period
of time; and that he was entitled to moral damages, exemplary damages and attorney's fees.

In its Comment,14 dated March 21, 2016, respondent averred that petitioner's claim of illegal
dismissal could not overcome the evidence it presented to show that no dismissal took place; and
that moral and exemplary damages could only be awarded only when there is a finding of illegal
dismissal and such dismissal is borne out with malice and bad faith on the part of the employer.

In his Reply,15 dated January 31, 2017, petitioner contended that the lack of service assignment for a
continuous period of six (6) months is an authorized cause for the termination of the employee, who
is then entitled to separation pay; and that respondent's offer of reinstatement was meant to negate
an otherwise consummated act of illegal dismissal.

Labor II – 1
 The Court's Ruling

The petition is meritorious.

Only questions of law may be raised in a Rule 45 petition; exceptions

Generally, questions of fact are beyond the ambit of a petition for review under Rule 45 of the Rules
of Court as it is limited to reviewing only questions of law. The rule, however, admits of exceptions
wherein the Court expands the coverage of a petition for review to include a resolution of questions
of fact. One of the exceptions is when the findings of fact are conflicting.16 The present petition falls
under this exception as the findings of fact by the NLRC, as affirmed by the CA, differed from those
of the LA. The LA found that petitioner was constructively dismissed whereas, the NLRC and the CA
opined that petitioner was never dismissed.

Security guard on floating status vis-a-vis constructive dismissal

Respondent refutes petitioner's constructive dismissal by arguing that the latter was not placed on a
floating status for more than six (6) months because he was suspended on October 4, 2010 for
sleeping on the job. Further, it asserts that it sent letters to petitioner requiring him to report back to
work and that it offered reinstatement during the proceedings before the LA, which petitioner turned
down. These arguments, notwithstanding, there is basis to hold that petitioner was constructively
dismissed.

In Reyes v. RP Guardians Security Agency,17 the Court held that temporary off-detail of a security
guard is generally allowed, but is tantamount to constructive dismissal if the floating status extends
beyond six (6) months, to wit: chanRoblesvirtualLawlibrary

Temporary displacement or temporary off-detail of security guard is, generally, allowed in a situation
where a security agency's client decided not to renew their service contract with the agency and no
post is available for the relieved security guard. Such situation does not normally result in a
constructive dismissal. Nonetheless, when the floating status lasts for more than six (6)
months, the employee may be considered to have been constructively dismissed. No less
than the Constitution guarantees the right of workers to security of tenure, thus, employees can only
be dismissed for just or authorized causes and after they have been afforded the due process of
law.18 [Emphasis supplied]
Relative thereto, constructive dismissal may exist if an act of clear discrimination, insensibility, or
disdain by an employer becomes so unbearable on the part of the employee that it can foreclose any
choice by him except to forego his continued employment19 or when there is cessation of work
because continued employment is rendered impossible, or unlikely, as an offer involving a demotion
in rank and a diminution in pay.20

Security guard on floating status must be assigned to a specific posting

In the case at bench, petitioner was last deployed on October 4, 2010. Thus, it was incumbent upon
respondent to show that he was redeployed within six (6) months from the said date. Otherwise,
petitioner would be deemed to have been constructively dismissed.

A perusal of the records, however, reveals that aside from respondent's bare assertions that
petitioner was suspended, which the latter had denied, there was no evidence of the imposition of
said penalty. Respondent could have easily produced documents to support its contention that
petitioner had been suspended, considering that employers are required to observe due process in
the discipline of employees.

Respondent could not rely on its letter requiring petitioner to report back to work to refute a finding
of constructive dismissal. The letters, dated November 5, 2010 and February 3, 2011, which were
supposedly sent to petitioner merely requested him to report back to work and to explain why he
Labor II – 1
failed to report to the office after inquiring about his posting status. More importantly, there was no
proof that petitioner had received the letters.

In Tatel v. JLFP Investigation (JFLP Investigation),21 the Court initially found that the security guard
was constructively dismissed notwithstanding the employer's letter ordering him to report back to
work. It expounded that in spite of the report-to-work order, the security guard was still
constructively dismissed because he was not given another detail or assignment. On motion for
reconsideration, however, the Court reversed its ruling after it was shown that the security guard
was in fact assigned to a specific client, but the latter refused the same and opted to wait for another
posting.

A holistic analysis of the Court's disposition in JFLP Investigation reveals that: [1] an employer must
assign the security guard to another posting within six (6) months from his last deployment,
otherwise, he would be considered constructively dismissed; and [2] the security guard must be
assigned to a specific or particular client. A general return-to-work order does not suffice.

In Exocet Security and Allied Services Corporation v. Serrano (Exocet Security),22 the Court absolved
the employer even if the security guard was on a floating status for more than six (6) months
because the latter refused the reassignment to another client, to wit: chanRoblesvirtualLawlibrary

In the controversy now before the Court, there is no question that the security guard, Serrano, was
placed on floating status after his relief from his post as a VIP security by his security agency's client.
Yet, there is no showing that his security agency, petitioner Exocet, acted in bad faith when it placed
Serrano on such floating status. What is more, the present case is not a situation where Exocet
did not recall Serrano to work within the six-month period as required by law and
jurisprudence. Exocet did, in fact, make an offer to Serrano to go back to work. x x x

Clearly, Serrano's lack of assignment for more than six months cannot be attributed to petitioner
Exocet. On the contrary, records show that, as early as September 2006, or one month after Serrano
was relieved as a VIP security, Exocet had already offered Serrano a position in the general security
service because there were no available clients requiring positions for VIP security. Notably,
even though the new assignment does not involve a demotion in rank or diminution in salary, pay, or
benefits, Serrano declined the position because it was not the post that suited his
preference, as he insisted on being a VIP Security. x x x

Thus, it is manifestly unfair and unacceptable to immediately declare the mere lapse of the
six-month period of floating status as a case of constructive dismissal, without looking
into the peculiar circumstances that resulted in the security guard's failure to assume
another post. This is especially true in the present case where the security guard's own
refusal to accept a non-VIP detail was the reason that he was not given an assignment
within the six-month period. The security agency, Exocet, should not then be held
liable.23 [Emphases supplied]
Applying the foregoing to the present controversy, respondent should have deployed
petitioner to a specific client within six (6) months from his last assignment. The
correspondences allegedly sent to petitioner merely required him to explain why he did
not report to work. He was never assigned to a particular client. Thus, even if petitioner
actually received the letters of respondent, he was still constructively dismissed because
none of these letters indicated his reassignment to another client. Unlike in Ecoxet
Security and JFLP Investigation, respondent is guilty of constructive dismissal because it
never attempted to redeploy petitioner to a definite assignment or security detail.

Further, petitioner's refusal to accept the offer of reinstatement could not have the effect of
validating an otherwise constructive dismissal considering that the same was made only after
petitioner had filed a case for illegal dismissal. Further, at the time the offer for reinstatement was
made, petitioner's constructive dismissal had long been consummated.24 Such belated gesture does
not absolve respondent from the consequences of petitioner's dismissal.
Labor II – 1
WHEREFORE, the July 3, 2015 Decision and October 13, 2015 Resolution of the Court of Appeals in
CA-G.R. SP No. 125948 are REVERSED and SET ASIDE. The November 29, 2011 Decision of the
Labor Arbiter is REINSTATED.

Labor II – 1
57.) G.R. No. 165757             October 17, 2006

GALAXIE STEEL WORKERS UNION (GSWU-NAFLU-KMU), EDUARDO FLORES, BONIFACIO LABACO,

SALVADOR VERDEFLOR, PAULITO NIEVES, NILO AMENAZOR, BENJAMIN BEDUYA, EUTIQUIO MENESES,
CENON LABACO, DANILO MARANAN, ELISEO LASTIMOSO, JAMES MADERAS, EFREN LABACO, CESARIO
BOLSICO, DARIO DECALAIN, SAMMY CEDENO, PRUDENCIO DELA CRUZ, EDGARDO PASTRANA, DANILO
BERMUDEZ, BILLY BLASCO, ROBERTO PEPINO, RUBEN TENOSO, ORLANDO TUDILLA, JESSIE SACE,
JUNE DALAYAT, FRANCISO LABACO, EDIN DEMAYO, WILFREDO CHENG, JAIME GANDO, JOSELITO
GUANZON, VICTOR DELMUNDO, NATHANIEL PEROY, ROBERTO VIRTUDAZO, RICARDO HILAGA,
RODRIGO FIRMANEZ, RENE VILLA, VERGELIO ICO, NOLITO PANUNCIA, ALDRONICO BAHILLO,
FLORENCIO LANZADEROS, ROLLY ROTIL, BENJAMIN ESCANO, DOMINADOR ABAINCIA, ROMEO LITANG,
NELSON PETALIO, MARIO VILLAMOR, AGUSTIN CONSTANTINO, HERMINIO AGUSTIN, VICTORIO
NEMENZO, MABINI YARCIA, PERCY ZOSIMO, ANGELITO DELOS REYES, ADVINCULA ELMEDULAN,
GORGONIO BOLORAN, ALAN MONIN, JESSIE PACALINGGA, and MICHAEL DACLAG, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, GALAXIE STEEL CORPORATION and RICARDO
CHENG, respondents.

DECISION

CARPIO MORALES, J.:

Assailed via petition for review are issuances of the Court of Appeals in CA-G.R. SP No. 68669, to wit:
Decision1 dated March 26, 2004 denying petitioners’ petition for certiorari and upholding the decision of the National
Labor Relations Commission (NLRC) in NLRC NCR CA No. 026956-00, and Resolution dated October 19, 2004
denying petitioners’ motion for reconsideration of the decision.

Respondent Galaxie Steel Corporation (Galaxie) is a corporation engaged in the business of manufacturing and
sale of re-bars and steel billets which are used primarily in the construction of high-rise buildings. On account of
serious business losses which occurred in 1997 up to mid-1999 totaling around P127,000,000.00,2 Galaxie decided
to close down its business operations.

Galaxie thus filed on July 30, 1999 a written notice with the Department of Labor and Employment (DOLE) informing
the latter of its intended closure and the consequent termination of its employees effective August 31, 1999.3 And it
posted the notice of closure on the corporate bulletin board.4

On September 8, 1999, petitioners Galaxie Steel Workers Union and Galaxie employees filed a complaint for illegal
dismissal, unfair labor practice, and money claims against Galaxie.

The Labor Arbiter, by Decision of October 30, 2000, declared valid Galaxie’s closure of business but nevertheless
ordered it to pay petitioner-employees separation pay, pro-rata 13th month pay, and vacation and sick leave credits.
The dispositive portion of the decision reads:

WHEREFORE, judgment is hereby rendered ordering Respondents to pay complainants separation pay,
pro-rata 13th month pay, and vacation leave and sick leave credits in the following computed amounts:

xxxx

Labor II – 1
 Respondents are further ordered to pay complainants their tax refund for 1999 and to pay 10% attorney’s
fees based on the total withheld labor standard benefits.

The complaint for unfair labor practice, illegal lockout, wage differentials, and other money claims are hereby
disallowed for lack of merit.

SO ORDERED.5

On appeal, the NLRC upheld the Labor Arbiter’s decision but reversed the award of pro-rata 13th month pay and
vacation and sick leave credits, the same not being among petitioners’ causes of action as in fact they were not
even mentioned in their pleadings.6 And it reversed too the award for separation pay, the closure of Galaxie’s
business being due to serious business losses. Nevertheless, the NLRC directed Galaxie to grant petitioners, by
way of financial assistance, the same amount given to the employees who had executed quitclaims. Thus the
dispositive portion of the NLRC decision read:

WHEREFORE, the decision appealed from is hereby SET ASIDE. The complaint for unfair labor practice
and illegal dismissal is DISMISSED for lack of merit. The respondent Galaxie Steel Corporation is hereby
ordered to extend as any by way of financial assistance the equivalent of ten (10) day’s (sic) salary for every
year of service to each of the following: Eduardo Flores, Bonifacio Labaco, Salvador Verdeeflor, Paulito
Nieves, Nilo Amenazor, Benjamin Beduya, Eutiquio Meneses, Cenon Labaco, Danilo Maranan, Eliseo
Lastimoso, James Maderas, Efren Labaco, Cesario Bolsico, Dario Cecalain, Sammy Cedeno, Prudencio
dela Cruz, Edgardo Pastrana, Danilo Bermudez, Billy Blasco, Roberto Pepino, Ruben Tenoso, Orlando
Dudilla, Jessie Sace, June Dalayat, Francisco Labaco, Edwin Demayo, Wilfredo Cheng, Jaime Gando,
Joselito Guanzon, Victor Delmundo, Nathaniel Peroy, Roberto Virtudazo, Ricardo Hilaga, Rodrigo Firnanez,
Rene Villa, Vergelio Ico, Nolito Panuncio, Aldronico Bahillo, Florencio Lanzaderos, Rolly Rotil, Benjamin
Escano, Dominador Abaincia, Romeo Litang, Nelson Petalio, Mario Villamor, Agustin Constantino, Herminio
Agustin, Victorio Nemenzo, Mabini Yarcia, Percy Zosimo, Angelito delos Reyes, Advincula Elmedulan,
Gorgonio Boloran, Alan Monin, Jessie Pacalingga and Michael Daclag.

All other claims are DISMISSED for lack of merit.

SO ORDERED.7

Their motion for reconsideration having been denied, petitioners filed a petition for certiorari with the Court of
Appeals, arguing that the NLRC acted with grave abuse of discretion in not finding Galaxie guilty of unfair labor
practice and of violating petitioners’ right to notice of closure, and in deleting the award of separation pay.

In the assailed decision,8 the Court of Appeals upheld the NLRC decision and accordingly denied petitioners’
petition for certiorari as it did their motion for reconsideration.

Hence, the present petition for review which raises the following issues:

1. Whether or not [Galaxie] is guilty of unfair labor practice in closing its business operations shortly after
petitioner union filed for certification election.

2. Whether or not petitioners are entitled to separation pay.

3. Whether or not the written notice posted by [Galaxie] on the company bulletin board sufficiently complies
with the notice requirement under Article 283 of the Labor Code.

Petitioners contend that the Court of Appeals erred in not finding that Galaxie’s closure of business operations was
motivated not by serious business losses but by their anti-union stance.

It is settled that this Court is not a trier of facts, a rule which applies with greater force in labor cases where the
findings of fact of the NLRC are accorded respect and even finality, as long as they are supported by substantial
evidence from which an independent evaluation of the facts may be made.9 In this case, the Labor Arbiter, the
Labor II – 1
NLRC, and the Court of Appeals were unanimous in ruling that Galaxie’s closure or cessation of business
operations was due to serious business losses or financial reverses, and not because of any alleged anti-union
position. This Court finds no reason to modify such finding.

In any event, petitioners contend that Galaxie did not serve written notices of the closure of business operations
upon its employees, it having merely posted a notice on the company bulletin board. Hence, petitioners conclude,
following the doctrine in Serrano v. National Labor Relations Commission,10 Galaxie should be liable for backwages
from the date of dismissal until finality of the decision in the case.

Further, petitioners contend that the appellate court’s upholding of the deletion by the NLRC of separation pay is
contrary to the ruling in Banco Filipino Savings and Mortgage Bank v. National Labor Relations Commission 11 which
held that separation pay is proper in cases where closure or cessation of business operations is due to serious
business losses or financial reverses.

Indeed, Galaxie’s documentary evidence shows that it had been experiencing serious financial losses at the time it
closed business operations. As aptly found by the Court of Appeals:

The NLRC’s finding on the legality of the closure should be upheld for it is supported by substantial evidence
consisting of the audited financial statements showing that Galaxie continuously incurred losses from 1997
up to mid-1999, to wit: P65,753,480.65 in 1997, P48,429,785.89 in 1998, and P13,204,389.97 in 1999; and
of the various demand notices of payments from creditor banks. Besides, the petitioners had not presented
evidence to the contrary; nor did they establish that the closure was motivated by Galaxie’s anti-union
stance. True, the union was seeking the holding of a certification election at the time that Galaxie closed its
business operation, but that, without more, was not sufficient to attribute anti-unionism against
Galaxie. (Underscoring supplied)

Upon the other hand, petitioners failed to present concrete evidence supporting their claim of unfair labor practice.
Unfair labor practice refers to acts that violate the workers’ right to organize,12 and are defined in Articles 248 and
261 of the Labor Code. The prohibited acts relate to the workers’ right to self-organization and to the observance of
Collective Bargaining Agreement without which relation the acts, no matter how unfair, are not deemed unfair labor
practices.13

Respecting petitioners’ claim for separation pay, Article 283 of the Labor Code provides:

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

In North Davao Mining Corporation v. National Labor Relations Commission,14 this Court held that Article 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, the closure then is due to serious business
losses, the Labor Code does not impose any obligation upon the employer to pay separation benefits.15

Explaining the policy distinction in Article 283 of the Labor Code, this Court, in Cama v. Joni’s Food Services, Inc.,
declared:16

Labor II – 1
 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. x x x (Emphasis supplied)

The denial of petitioners’ claim for separation pay was thus in order.

Finally, with regard to the notice requirement, the Labor Arbiter found, and it was upheld by the NLRC and the Court
of Appeals, that the written notice of closure or cessation of Galaxie’s business operations was posted on the
company bulletin board one month prior to its effectivity. The mere posting on the company bulletin board does not,
however, meet the requirement under Article 283 of "serving a written notice on the workers." The purpose of the
written notice is to inform the employees of the specific date of termination or closure of business operations, and
must be served upon them at least one month before the date of effectivity to give them sufficient time to make the
necessary arrangements.17 In order to meet the foregoing purpose, service of the written notice must be
made individually upon each and every employee of the company.

Nevertheless, the validity of termination of services can exist independently of the procedural infirmity in the
dismissal. In Agabon v. National Labor Relations Commission,18 the Court deemed it best to revisit the doctrine
in Serrano,19 which was cited by petitioners, in relation to Wenphil Corp. v. National Labor Relations
Commission.20 After analyzing the consequences of the divergent doctrines on employment termination, the Court
held that in cases involving dismissals for cause, but without observance of statutory due process, the better rule is
to abandon the Serrano doctrine and to follow Wenphil by declaring that the dismissal was for cause but imposing
sanctions on the employer. By so doing, dispensing justice not just to employees but to employers as well is
achieved.21

In Business Services of the Future Today, Inc. v. Court of Appeals,22 which reiterated the ruling in Agabon v.
National Labor Relations Commission,23 this Court held that where the dismissal is for an authorized cause, the lack
of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer
should indemnify the employee, in the form of nominal damages, for the violation of his right to statutory due
process.

Ultimately, however, the amount of damages to be awarded the employee is addressed to the sound discretion of
the Court, taking into account the relevant circumstances.24

Under the facts and circumstances attendant to the case, this Court finds the amount of P20,000 in nominal
damages sufficient to vindicate each petitioner’s right to due process.

WHEREFORE, the assailed Decision dated March 26, 2004 and Resolution dated October 19, 2004 issued by the
Court of Appeals in CA-G.R. SP No. 68669 are AFFIRMED with the MODIFICATION that respondent Galaxie Steel
Corporation is ORDERED to PAY each of the individual petitioners the amount of P20,000.00 as nominal damages
for non-compliance with statutory due process.

Labor II – 1
58.)

BECTON DICKINSON PHILS., INC. and   G.R. Nos. 159969 & 160116
WILFREDO JOAQUIN ,
 
Petitioners,
 
 
Present:
 
 
 
PANGANIBAN, J., Chairman
- versus -
SANDOVAL-GUTIERREZ,
 
CORONA,
 
CARPIO MORALES, and
 

GARCIA, JJ.
NATIONAL LABOR RELATIONS
COMMISSION, HON. LABOR ARBITER
 
EDGARDO M. MADRIAGA and REINERIO
Z. ESMAQUEL ,
 
Respondents.
 

Promulgated:

November 15, 2005

x-----------------------------------------------------------------------------------x

DECISION

GARCIA, J.:

Before the Court are these consolidated identical petitions for review on certiorari to reverse and set aside the same
issuances of the Court of Appeals (CA) in CA-G.R. SP No. 74424, to wit:

Labor II – 1
 a)      Decision [1] dated May 16, 2003, affirming an earlier decision of

the National Labor Relations Commission [NLRC] which dismissed petitioners'

appeal thereto from an adverse decision of the Labor Arbiter on account of

petitioners' failure to comply with NLRC Resolution No. 01-02 amending NLRC

Rules of Procedure and for being devoid of merit; and

b)      Resolution [2] dated September 5, 2003 , denying petitioners' motion for

reconsideration.

Petitioner Becton Dickinson Philippines, Inc. (Becton, Phils., for brevity), is a domestic corporation engaged in
the business of importation, warehousing, exportation, manufacture, assembly, sale at wholesale, and promotion of
health care products needed by hospitals, doctors, laboratories, and pharmaceutical companies. The company is a
wholly-owned subsidiary of Becton Dickinson Worldwide, Inc., U.S.A. based in New Jersey, United States of America
(U.S.A.) and with operations in the Asia Pacific Region under the charge of Becton Dickinson Asia Pacific (Becton,
Asia, for short), which is based in Singapore. On the other hand, petitioner Wilfredo Joaquin (Joaquin, hereafter),
was formerly the Country Manager of Becton, Phils. when herein private respondent Reinerio Z. Esmaquel filed
On October 24, 2001 before the Labor Arbiter of the National Capital Region (South Sector) a single
complaint for  'Illegal dismissal and underpayment of separation and retirement benefits with actual, moral and
exemplary damages and attorney's fees and payment of backwages from time of termination until final
judgment , [3] therein naming both petitioners as respondents.

In a Decision dated March 26, 2002, [4] Labor Arbiter Edgardo M. Madriaga found Becton, Phils. and Joaquin to
have acted jointly and in concert in terminating Esmaquel's employment and declared the latter's dismissal illegal,
but held Becton, Phils. solely liable for payment of backwages, separation pay and retirement benefit differential,
moral and exemplary damages and attorney's fees.

This notwithstanding, Joaquin nevertheless joined Becton, Phils. in assailing the Labor Arbiter's decision by way of
appeal [5] to the National Labor Relations Commission (NLRC).

Upon dismissal of their appeal by the NLRC per Decision dated August 8, 2002 [6] and the denial of their motion for
reconsideration per Resolution dated September 30, 2002, [7] Becton, Phils. and Joaquin jointly filed with the Court
of Appeals a petition for certiorari with application for temporary restraining order and/or preliminary
injunction [8] under Rule 65 of the Rules of Court, which petition was eventually dismissed by the appellate court
per Decision dated May 16, 2003. Petitioners Becton, Phils. and Joaquin jointly filed a motion for
reconsideration. [9] On September 12, 2003, petitioners, through counsel, received a copy of the appellate
court's Resolution dated September 5, 2003, denying their motion for reconsideration.

Presently, however, Joaquin is no longer the Country Manager of Becton, Phils. and he already resides in the U.S.A.
once again. In view of the need to have his verification on his petition and certification against non-forum shopping
notarized and authenticated with the Philippine Consulate in the U.S.A., petitioner

Labor II – 1
Joaquin separately filed via  registered mail on September 29, 2003 a Motion for Extension of Time to File a
Petition for Review  dated September 27, 2003, [10] praying for an extension of 15 days or until October 11, 2003,
within which to file his petition for review on certiorari, the original copy of which motion the Court actually received
on October 7, 2001 and his petition thereafter docketed as' G.R. No. 159969 .

Also, on September 29, 2003 (the Monday after the 15-day reglementary period which fell on a Saturday)
petitioner Becton, Phils. separately filed via  registered mail its own petition for review which, upon actual receipt
by this Court on October 16, 2003, was docketed as G.R. No. 160116.

As earlier stated, both petitions assail and seek the annulment of the same decision and resolution of the Court of
Appeals (CA) in CA-G.R. SP No. 74424.

On January 26, 2004, the Court resolved to consolidate [11] the two (2) petitions upon petitioners'
motion [12] therefor. Considering the arguments raised in the two petitions, respondent's comment, and petitioners'
reply, the Court resolved to give due course thereto. And, with the filing of the parties' respective memoranda, the
case is now ripe for final determination.

The facts as culled from the voluminous records before us, are as follows:

In 1989, Becton, Phils. had two (2) main divisions, namely: (a) the Medical Division; and (b) the Diagnostics
Division. Jesus Fargas headed the Medical Division, while the position of head of the Diagnostics Division was
vacant. Also vacant was the position of Country Manager of Becton, Phils.

On September 12, 1989, private respondent Reinerio Z. Esmaquel started his stint with Becton, Phils. as Director of
Sales and Marketing of the Diagnostics Division. He held this position until March 1998.

As Sales and Marketing Director of the company's Diagnostics Division, respondent reported to Becton, Asia's  Vice
President of Diagnostics Sector. He was in charge of the overall supervision of twenty-three (23) employees working
under the sales and marketing organization. He was responsible for the attainment of sales and profit targets as
well as the long term growth and development of the diagnostic business of Becton, Phils. He reviewed and
approved the company's country marketing plans and budget before submission to Becton, Asia. He oversaw the
implementation of marketing plans through the sales and marketing managers. He represented the company in the
meeting of the Southeast Asia Steering Committee and Asia Pacific Supply Chain Management Committee of the
different affiliates of Becton Dickinson Worldwide, Inc. in the Asia-Pacific Region.

For his commendable performance as Sales and Marketing Director, respondent received numerous citations and
awards, the most notable of which was the President's Club Award which he received in 1993 with the distinction
that he was the only recipient of this award in Becton's Asia Pacific Region.

In March, 1998, Jesus Fargas was promoted to the position of Country Manager for Becton, Phils. Respondent, on
the other hand, was appointed Business Director thereof, reporting, this time, to the Country Manager instead of
the Vice President of Diagnostics Sector of Becton, Asia. Respondent was responsible for sales and marketing of
Infectious Disease Diagnostic, Immunocytometry System, and Instrument Service for the Asia Pacific Region. He
held this position up to December, 1999.

As Business Director, respondent exceeded the sales target given him by the Becton, Phils. for fiscal year 1999 and
for which the Company gave his team free trip incentive to Europe. In 1999, respondent also received a Business
Excellence Award from Becton, Phils.
Labor II – 1
In January, 2000, Becton, Phils. reorganized under the concept of 'Go To Market. For purposes of selling its
products, Becton, Phils. had organized two (2) divisions, namely, the Sales Division and the Marketing Division, and
designated respondent as the Director of Sales. As such, respondent was responsible for the whole sales force for
all products of the company. The Marketing Division, on the other hand, was placed under the Office of the Country
Manager and the same was in charge of the preparation of marketing plans, including advertising and promotional
programs and in booking orders/sales to distributors of Becton, Phils.

Under the foregoing reorganization, the Sales Division was responsible for in-market sales or the sale of all the
products of the company to the distributors. The distributors who buy the products at wholesale, in turn, are the
ones selling the products to the end users. The company is, however, generally responsible for the sale promotions
of the company's products to the end users.

Consistent with his work performance, respondent achieved the sales target assigned to him, for which
reason, Becton, Phils. awarded his team free trip to the U.S.A.

Eventually, respondent was also appointed one of the members of the Becton Dickinson (BD) Philippines Leadership
Team, a group within Becton, Phils., which was responsible for the formulation of policies and rules of the company.

In November, 2000, pursuant to its established policies and guidelines for terminating employees, Becton,
Phils. retrenched nine (9) employees, giving them separation benefits in accordance with such guidelines. Its very
own Country Manager, Jesus Fargas, was among those whose services were terminated. Accordingly, each of them
received separation benefits computed as follows:

    Adjusted        

Monthly No. of Years of

SEPARATION PAY = x 3 X
Salary Service
 

where,
Adjusted    
   
Monthly Monthly
= X 13/12
Salary Salary
 
 

In addition thereto, the nine (9) terminated employees were also paid retirement benefits under the company's
Retirement Plan, computed as follows:
 

 
           

RETIREMENT = Monthly x 1.5 X No. of Years of

BENEFITS Salary Service

Labor II – 1
Thereafter, each of the nine (9) terminated employees executed separate Release and Quitclaim.

After Country Manager Jesus Fargas left the company, respondent was considered for said position. Pending the
appointment of a Country Manager, Becton, Asia  created a 'Self-Managed Team to run the day-to-day operations of
the company. The 'Self-Managed Team was composed of seven (7) members consisting of four (4) Filipinos and
three (3) foreigners. Respondent was named one of the four (4) Filipino members of the said team.

On May 16, 2001, Becton, Asia announced the appointment of petitioner Wilfredo Joaquin, a former Filipino
citizen who later acquired American citizenship, as the new Country Manager of Becton, Phils.

Being a stranger to the company's operations, as well as to the customers of Becton, Phils., Joaquin sought
respondent's assistance to address serious problems of the company, and to orient him in the mechanics of the
company's sales and marketing efforts in the Philippines.

Then, on that fateful day of July 10, 2001 or barely two (2) months from Joaquin's assumption of his position as
Country Manager, Becton, Phils. served upon respondent a notice of termination [13] of employment effective
August 10, 2001, on the ground that his position has been declared redundant. In full, the notice reads:

July 10, 2001

To : R. Z. Esmaquel
From : Z. L. del Mundo
Dear Rene
For the past weeks, the BD Philippines Leadership Team has been discussing the
roles of each function within the BD Philippines Organisation.
With the move toward building strong and empowered teams and organizations due
to business exigencies, the time has come to review the role and services being
provided by each team member.
It is unfortunate that your position has been made redundant due to this
restructuring. We therefore regret to advise you of your termination on the ground
of redundancy effective August 10, 2001. Please return all company properties on
or before July 16, 2001.
We are determined to do our best to assist you by providing the necessary support.
Please refer to the attachment for the details of your payout. We also wish to
remind you that if you have any stock options, kindly exercise them within 90 days
of your termination date from the company.
We thank you for your service to the company. Do let us know if you have any
other concerns as we are most willing to assist in any way that we can.
Yours sincerely,
Becton Dickinson Philippines, Inc.
By:
Zenaida del Mundo (Sgd.)
Becton, Phils. offered to pay separation benefits to respondent computed as follows:
 

Labor II – 1
  
           

SEPARATION = Monthly x 1.38 x No. of Years of

Salary Service
PAY
 

plus retirement pay computed as follows:

 
           

RETIREMENT = Monthly x .75 x No. of Years of

BENEFITS Salary Service

Respondent objected to his termination because, as member of the BD Philippines Leadership Team, he was not
aware of any meeting or discussion of the team about the roles of his position in the organization. The roles of his
position/function in the company have never been placed in the agenda for meeting of the BD Philippines
Leadership Team. Respondent asked Joaquin why his position was declared redundant but Joaquin could not give
him any plausible reason except that the redundancy of his position was due to restructuring of the company
organization.

Respondent asked Joaquin if he had taken into consideration in declaring redundant his position, the
guidelines/rules for termination of employment as directed by Becton, Asia's  President, namely: (a) to retain the
best employee; (b) consider the performance of the employee for the last three (3) years; and (c) refrain from
taking decision based on individual salary. Joaquin failed to answer this question.

Respondent further protested when he was informed that the separation benefits to be paid to him was way below
those received by the nine (9) employees previously terminated. He demanded an equal treatment from the
company, considering that he rendered exemplary service thereto and that he is being terminated involuntarily.

This notwithstanding, he was terminated and required to sign a Release and Quitclaim, [14] otherwise, his
separation pay and retirement benefits will be withheld. Respondent found no other alternative but to give in, and
reluctantly signed the document.

On September 19, 2001, respondent, through counsel, sent Becton, Phils. a letter [15] protesting his termination
from service and/or illegal dismissal and demanded full payment of his separation pay and retirement benefits.

In its letter dated September 26, 2001, [16] counsel of Becton, Phils. rejected respondent's claim, explaining that he
had been given his full separation pay and retirement benefits (net of outstanding retirement loan and 50% share
in the car loan) in addition to which, he was also given a laptop computer, a Nokia 8850 cellular phone, free of
charge, and that he had already signed a Release and Quitclaim.

Aggrieved, respondent filed on October 24, 2001 a complaint against Becton, Phils. 'and Wilfredo Joaquin with the
Arbitration Branch of the NLRC for illegal dismissal, underpayment of separation pay and retirement benefits, actual,
moral, and exemplary damages, and attorney's fees.

On March 26, 2002, Labor Arbiter Edgardo M. Madriaga rendered a decision, dispositively reading as follows:

Labor II – 1
 WHEREFORE, judgment is hereby rendered:

1. The dismissal of complainant is declared illegal;

2. Respondent company is ordered to pay complainant Esmaquel:

a) Backwages of P197,525.00 per month reckoned from August 11,

2001 until actually paid;

b) Separation pay differential of P4,148,024.76 with legal interest from

date of judgment until actually fully paid;

c) Retirement benefit differential of P1,765,873.50 with legal interest

from date of this judgment until actually paid;

d) Moral damages of P300,000.00.

e) Exemplary damages of P300,000.00.

f) Attorney's fees in an amount equivalent to 10% of the total of all

the foregoing amounts.

SO ORDERED.

Therefrom, petitioners Becton, Phils. and Joaquin jointly appealed to the NLRC which, in a decision dated August 8,
2002, [17] affirmed that of the Labor Arbiter, to wit:
 

WHEREFORE, for failure to comply with the NLRC Resolution 01-02 amending

the NLRC Rules of Procedure, and for being devoid of merit, the appeal is

hereby dismissed.

SO ORDERED.

With their motion for reconsideration having been denied by the NLRC in its Resolution of September 30,
2002, [18] petitioners Becton, Phils. and Joaquin jointly went to the Court of Appeals (CA) via  a petition
for certiorari  under Rule 65 of the Rules of Court, whereat their recourse was docketed as CA-G.R. SP No. 74434.

Labor II – 1
As stated at the threshold hereof, the Court of Appeals, in a Decision dated May 16, 2003, dismissed petitioners'
recourse thereto and affirmed the assailed NLRC decision and resolution, thus:

WHEREFORE, in the light of the foregoing, the petition for certiorari

is DISMISSED and the assailed Decision and Resolution of the public

respondent NLRC are AFFIRMED.

The Urgent Motion (for Issuance of Preliminary Injunction) being merely

adjunct to the main suit, the same must pro tanto be DENIED.

SO ORDERED.

Their motion for reconsideration having been denied by the appellate court in its Resolution dated September 5,
2003, Becton, Phils. and Joaquin, this time separately, filed with this Court their respective petitions for review
on certiorari  under Rule 45 of the Rules of Court.  Eventually, the two petitions were consolidated per this Court's
minute Resolution [19] of 26 January 2004.
As we see it, the consolidated petitions raise two main issues: procedural and substantive.

The procedural issue: whether or not the Court of Appeals erred in not finding grave abuse of discretion on
the part of the NLRC when the latter dismissed petitioners' appeal from the Labor Arbiter's decision for
petitioners' failure to comply with NLRC Resolution 01-02 (Series of 2002) due to lack of a certification of non-
forum shopping.

The substantive issue: whether or not the Court of Appeals erred in not finding grave abuse of discretion on
the part of the NLRC when the latter dismissed the same appeal on the additional ground of 'being devoid of
merit.

We DENY.

The Court shall first address the procedural issue.

NLRC Resolution No. 01-02 (Series of 2002), amending the NLRC Rules of Procedure, provides:

SECTION 4. REQUISITIES FOR PERFECTION OF APPEAL. a) The Appeal shall be filed within the
reglementary period as provided in Section 1 of this Rule; shall be verified by appellant himself in
accordance with Section 4, Rule 7 of the Rules of Court, with proof of payment of the required appeal
fee and the posting of a cash or surety bond as provided in Section 6 of this Rule; shall be
accompanied by memorandum of appeal in three (3) legibly typewritten copies which shall state the
grounds relied upon and the arguments in support thereof, the relief prayed for, and a statement of
the date when the appellant received the appealed decision, resolution or order and a certification
of non-forum shopping with proof of service on the other party of such appeal. A mere notice of
appeal without complying with the other requisites aforestated shall not stop the running of the
period for perfecting an appeal. (Emphasis supplied).

Labor II – 1
The NLRC dismissed petitioners' appeal from the Labor Arbiter's decision for violation of the foregoing rule due
to lack of a certification of non-forum shopping. The Court of Appeals rejected petitioners' plea for the liberal
application of the rules in their case, where admittedly, petitioners filed their certification of non-forum
shopping twenty-one (21) days late. Partly says the appellate court in its assailed decision of May 16, 2003:

The certificate of non-forum shopping as provided [in the aforequoted provision of NLRC Resolution
No. 01-02] is mandatory and should accompany pleadings filed before the NLRC. Its language is very
clear and needs no further interpretation, to wit: xxx.

xxx xxx xxx

The perfection of an appeal in the manner and within the period prescribed by law is not only
mandatory but jurisdictional upon the court a quo, and the failure to perfect that appeal renders its
judgment final and executory. A fundamental precept is that the reglementary periods under the
Rules are to be strictly observed for being considered indispensable interdictions against needless
delays and an orderly discharge of judicial business. The strict compliance with such periods has
more than once been held to be imperative, particularly and most significantly in respect to
perfection of appeals. The finality of a judgment becomes a fact upon the lapse of the reglementary
period to appeal if no appeal is perfected, and the court loses all jurisdiction over the case, and it
becomes the ministerial duty of the court concerned to order execution of the judgment. After the
judgment has become final and executory, vested rights are acquired by the winning party. Just as
the losing party has the right to file an appeal within the prescribed period, so also the winning party
has the correlative right to enjoy the finality of the resolution of the case.

The failure of the petitioners to comply with the aforementioned NLRC Resolution is fatal to their
cause for their non-compliance with the requirement relative to the filing of certificate of non-forum
shopping did not toll the running of the period for perfecting their appeal. Perfection of appeal on
time is mandatory and jurisdictional. Failure to do so makes the March 26, 2002 Decision of the
Labor Arbiter final and executory. (Words in bracket added).

In this recourse, petitioners put emphasis on the supposed basis to justify their assertion of liberal application
of the rules, namely, to avoid miscarriage of substantial justice, allegedly on account of NLRC's total disregard
of the evidence material to or decisive of the controversy. On this score, petitioners presently fault the Court
of Appeals for not finding grave abuse of discretion on the part of the Commission.

It is relevant to note that petitioners are aware of the fact that compliance with the requisites for perfecting an
appeal is the general rule, and non-compliance therewith is the exception. Petitioners, however, insist that
their case falls within the exception.

In resolving this issue, it may well be stressed that the right to appeal is not a natural right nor is it part of due
process, for it is merely a statutory privilege that must be exercised in the manner and according to
procedures laid down by law. [20] Petitioners cannot insist, as there is no duty on the part of the court or the
NLRC for that matter, to take cognizance of an appeal which has not been perfected in accordance with the
rules of procedure laid down therefor. It is only in the exercise of courts' sound judicial discretion and in the
interest of substantial justice, that this Court may suspend the rules should it find cogent reasons for doing so.

Crucial to the resolution of the procedural issue of whether or not the Court should now suspend the rules is
the resolution of the next issue which pertains to the substantive aspect of the case. Should there be grave
abuse of discretion on the part of the appellate court in resolving the factual and legal issues raised before it
as regards the alleged illegal dismissal of herein respondent, then the Court shall have a cogent reason to
suspend the rules.

Labor II – 1
This brings us to the substantive aspect of the case.

The Court will first focus on petitioners' basic submission that respondent was validly and legally terminated as
Sales Manager on the ground of redundancy, and finally on their contention that respondent's claim is barred
by the Release and Quitclaim signed by him.

On the matter of redundancy, the Labor Arbiter ruled, and both the NLRC and the Court of Appeals
unanimously agreed therewith, that:

The record supports the finding that the Company and Joaquin disregarded totally the
Company's guidelines in declaring [respondent's ] position redundant.
The principal reason why [respondent's ] position was declared redundant is the fact
that he was the highest paid employee with a monthly salary of P197,525.00. The
Company's main purpose in terminating [respondent] was to cut down expenses and it
did so by dismissing him in one fell swoop, camouflaging its malice by using the ground
of redundancy. Thus was violated the Company rule that the decision to terminate must
not be based on salary. The Company certainly could not find fault with [respondent's ]
performance. In 1999 his work performance was 'outstanding. In 2000 his work
performance was 'very good. For the FY 2000, [respondent] achieved 104% sales
performance. Hence, there were violations of the Company rules to retain the best
employee; to consider the performance of the employee for the last three years;
protect the best people; and remove those who least contribute.
There is no clear proof that [respondent's ] services are in excess of the
Company's reasonable demands and requirements; and that there is no other
alternative available to the Company except to dismiss [respondent]. The
superfluity of [respondent's ] position has not been established. There has
been no previous overhiring of employees. On the contrary, the Company had
already terminated nine (9) employees. There is no proof of decreased volume
of business. Indeed, [respondent] had overshot the sales target ' he achieved
104% sales performance. Neither is there proof that the Company had
dropped a product line or service.
The Company does have standards or criteria in choosing who to dismiss, but it violated
them. On the other hand, it had hewed closely to these standards when it terminated
the nine (9) other employees.
The records supports the finding that the Company treated [respondent] in a way
different from its treatment of aforesaid nine (9) employees not only in the matter of
termination but also in the matter of separation pay and retirement
benefits. [21] (Emphasis' and words in bracket ours)
 

As may be noted from the foregoing excerpt from the Labor Arbiter's decision, the substantive issue of validity
of respondent's termination of employment on the alleged ground of redundancy is basically factual in nature.
There's no question that Rule 45 of the Rules of Court provides that only questions of law may be raised in a
petition for review on certiorari, the reason being that this Court is not a trier of facts.  It is not for this Court
to reexamine and reevaluate the evidence on record. 

As held by this Court in the very recent case of Dusit Hotel Nikko vs. National Union of Workers in Hotel: [22]

the factual findings of the NLRC, as affirmed by the CA, are accorded high respect and
finality unless the factual findings and conclusions of the Labor Arbiter clash with those
of the NLRC and the CA, in which case, the Court will have to review the records and

Labor II – 1
 the arguments of the parties to resolve the factual issues and render substantial justice
to the parties.
 
 

In Alfaro vs. Court of Appeals, [23] the Court, per Justice Artemio V. Panganiban, applied the same ruling, and
further explained the reasons therefor, to wit:

 
The Supreme Court is not a trier of facts, and this doctrine applies with greater force in
labor cases. Factual questions are for the labor tribunals to resolve. In this case, the
factual issues have already been determined by the labor arbiter and the National Labor
Relations Commission. Their findings were affirmed by the CA. Judicial review by this
Court does not extend to a reevaluation of the sufficiency of the evidence upon which
the proper labor tribunal has based its determination.
 
Indeed, factual findings of labor officials who are deemed to have acquired expertise in
matters within their respective jurisdictions are generally accorded not only respect, but
even finality, and are binding on the Supreme Court. Verily, their conclusions are
accorded great weight upon appeal, especially when supported by substantial evidence.
Consequently, the Supreme Court is not duty-bound to delve into the accuracy of their
factual findings, in the absence of a clear showing that the same were arbitrary and
bereft of any rational basis.
 

It bears stressing herein that the factual findings of the Labor Arbiter were, upon review, affirmed in toto  by
the NLRC, and thereafter, by the Court of Appeals. A heavy burden, as it were, rests upon petitioners to
convince the Court that it should take exception from such a settled rule.

Considering petitioners' vehement plea for the suspension of the rules pertaining to the perfection of appeal
despite the contrary practice thereto, the Court painstakingly reviewed the records of the case together with
the parties' pleadings. Unfortunately, even after thoroughly going over petitioners' pleadings, the Court finds
no cogent reason to take exception from this governing rule. Since the factual findings of the Labor Arbiter are
supported by substantial evidence, the Court upholds the factual conclusion that redundancy was not duly
established by evidence. Besides, this conclusion conforms with jurisprudence on the matter.

Redundancy is one of the authorized causes of dismissal, which, in the leading case of Wiltshire File Co., Inc.
vs. NLRC, [24] this Court had occasion to explain the nature of, in the following manner:

x x x redundancy in an employer's personnel force necessarily or even ordinarily refers

to duplication of work. That no other person was holding the same position that private
respondent held prior to the termination of his services, does not show that his position
had not become redundant. Indeed, in any well organized business enterprise, it would
be surprising to find duplication of work and two (2) or more people doing the work of
one person. We believe that redundancy, for purposes of 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, decrease in volume of
business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. (Emphasis supplied.)
[

Labor II – 1
Respondent duly questioned the validity of using the ground of redundancy as basis for his forced separation
from the company. On the other hand, however, aside from their plain allegation that respondent's 'position
has been made redundant due to restructuring [25], and that 'the Company was constrained to terminate the
services of complainant as a consequence of organizational changes which were necessitated by a decrease in
the volume of sales of the Company, [26] petitioners utterly failed to establish by substantial evidence that
indeed, respondent's position in the company became redundant due to concrete and real factors recognized
by law and relevant jurisprudence. Evidently cognizant of such neglect, petitioners attempted to correct the
situation by now attaching a photocopy of the Report of Independent Auditors Punongbayan & Araullo dated
October 10, 2001 as Annex 'C [27] to their petition before this Court to substantiate their allegations before
the Labor Arbiter. Unfortunately, this Court is not a trier of facts and evidence not presented during the trial
cannot be considered at all.
 
Besides, although the Court is mindful, and thus' held in Dole Philippines, Inc. vs. NLRC, [28] that the
characterization of an employee's services as no longer necessary or sustainable, and therefore, properly
terminable, is an exercise of business judgment on the part of the employer, and that the wisdom or
soundness of such characterization or decision is not subject to discretionary review, provided of course that
violation of law or arbitrary or malicious action is not shown, the Court in the above-cited case of Dusit Hotel
Nikko nevertheless emphasized that:

like other rights, there are limits thereto. The managerial prerogative to transfer
personnel must be exercised without grave abuse of discretion, bearing in mind
the basic elements of justice and fair play. Having the right should not be confused with
the manner in which that right is exercised.  Thus, it cannot be used as a subterfuge by
the employer to rid himself of an undesirable worker. (Emphasis ours.)

Along the same vein is this Court's ruling in Metrolab Industries, Inc. vs. Roldan-Confesor, [29] to wit:

the exercise of management prerogatives was never considered boundless. Thus,

in Cruz vs. Medina  (177 SCRA 565 [1989]), it was held that management's prerogative
must be without abuse of discretion
All these point to the conclusion that the exercise of managerial prerogatives is not
unlimited. It is circumscribed by limitations found in law, a collective bargaining
agreement, or the general principles of fair play and justice (University of Sto. Tomas
v. NLRC, 190 SCRA 758 [1990]) (Emphasis ours).
 

We agree with respondent that when Becton, Asia laid down guidelines for terminating employees and
petitioner Becton, Phils. applied these in previously laying off nine (9) of its employees, Becton,
Phils. committed grave abuse of discretion in not applying the same criteria in respondent's case. There is
reason and basis for the State, through the NLRC in this case, to intervene and reexamine the validity of
petitioner company's exercise of its managerial prerogatives in declaring a certain position redundant insofar
as in so doing, the rights of respondent to said position is jeopardized.

Moreover, even after a thorough review of the records of this case, the Court finds no valid and acceptable
explanation for the unequal treatment by petitioner Becton, Phils. in the manner of termination of the nine
(9) employees and that of respondent, and therefore agrees with the Labor Arbiter that such discriminatory
act is abhorrent to the basic principles of social justice and protection of labor, akin to a violation of the equal
protection clause enshrined in the Constitution.

Indeed, it smacks of incredulity to believe that a topnotch employee who has contributed much to the growth
of the company and for which the latter even reciprocated him with honors and awards, suddenly in a span of
less than two (2) months from the time a new company Country Manager assumed post, would wake up one
morning with a notice that his position is already superfluous and therefore he is no longer needed.

Labor II – 1
Petitioners also contend that respondent already signed a Release and Quitclaim which forthwith bars any
further claims against the company. The Labor Arbiter, however, ruled that:

[Respondent] is not on equal footing with the Company; he was in a precarious

financial position; he needed the money, to be given to him by the Company; so he
signed, otherwise his family would starve. [Respondent's ] signing of the Release and
Quitclaim as a condition for payment to him of the separation pay and 'Goodwill does
not bar him from seeking the full measure of his right or to demand benefits to which
he is legally entitled or to question the legality of his dismissal. (Words in bracket ours).

The rule on the matter is as follows:

The validity of quitclaims executed by laborers has long been recognized in this
jurisdiction. In Periquet vs. National Labor Relations Commission (186 SCRA 724
[1990]), this Court ruled that not all waivers and quitclaims are invalid as against public
policy. If the agreement was voluntarily entered into and represents a
reasonable settlement of the claims of the employee, it is binding on the parties
and may not later be disowned simply because of a change of mind. Such legitimate
waivers resulting from voluntary settlements of laborer's claims should be treated and
upheld as the law between the parties (Labor Congress of the Philippines vs. NLRC, 292
SCRA 469, 477 [1998]). However, when as in this case, the voluntariness of the
execution of the quitclaim or release is put into issue, then the claim of
employee may still be given due course (Talla vs. National Labor Relations
Commission, 175 SCRA 479, 480-481 [1989]). The law looks with disfavor upon
quitclaims and releases by employees pressured into signing the same by
unscrupulous employers minded to evade legal responsibilities (Labor Congress,
supra.). (Emphasis ours.) [30]
 

The factual and legal bases of the Labor Arbiter's ruling on the supposed Release and Quitclaim are well
established. We cannot subscribe to petitioners' reasoning that the foregoing ruling on the validity and binding
effect of releases and quitclaims apply only to rank-and-file workers, and find no application to respondent in this
case, who happens to be a highly intelligent man who once held the top sales position at petitioner company.
There is no nexus between intelligence, or even the position which the employee held in the company when it
concerns the pressure which the employer may exert upon the free will of the employee who is asked to sign a
release and quitclaim. A lowly employee or a sales manager, as in the present case, who is confronted with the
same dilemma of whether signing a release and quitclaim and accept what the company offers them, or refusing
to sign and walk out without receiving anything, may do succumb to the same pressure, being very well aware
that it is going to take quite a while before he can recover whatever he is entitled to, because it is only after a
protracted legal battle starting from the labor arbiter level, all the way to this Court, can he receive anything at
all. The Court understands that such a risk of not receiving anything whatsoever, coupled with the probability of
not immediately getting any gainful employment or means of livelihood in the meantime, constitutes enough
pressure upon anyone who is asked to sign a release and quitclaim in exchange of some amount of money which
may be way below what he may be entitled to based on company practice and policy or by law.

It may likewise be noted that what respondent received when he signed the Release and Quitclaim was less than
half of what he is entitled to under the circumstances, as correctly computed by the Labor Arbiter in his March
26, 2002 decision. This is another reason why the Court cannot rely upon such Release and Quitclaim to validly
bar respondent from thereafter claiming additional benefits from petitioner Becton, Phils.

Finding no merit in the substantive aspect of the present petitions, the Court has' no legal basis' to rule in
favor of liberal application of procedural rules in this case by suspending the same and allowing due course to
petitioners' appeal before the NLRC despite violation of NLRC Resolution No. 01-02 (Series of 2002) for lack of
a certification of non-forum shopping.

Labor II – 1
All told, the Court finds no reversible error with the assailed decision and resolution of the Court of Appeals. As
it is, no grave abuse of discretion may be imputed by said court upon the NLRC, which merely abides by its
own rules of procedure.

Worse, even if the aforesaid procedural and technical infirmities were to be ignored, the Court finds no cogent
reason to depart from, much more nullify and set aside, the challenged decision and resolution of the Court of
Appeals because definitely, no grave abuse of discretion could be imputed to the NLRC in affirming the
decision of the Labor Arbiter on its merits.

WHEREFORE, the instant petitions are DENIED and the assailed Decision and Resolution of the Court of
Appeals' AFFIRMED.

Labor II – 1
 59.) [G.R. NOS. 171618-19 : March 20, 2009]

JACKBILT INDUSTRIES, INC., Petitioner, v. JACKBILT EMPLOYEES WORKERS UNION-NAFLU-

KMU, Respondent.

DECISION

CORONA, J.:

This Petition for Review on Certiorari 1 seeks to reverse and set aside the July 13, 2005 decision2 and
February 9, 2006 resolution3 of the Court of Appeals in CA-G.R. SP No. 65208 and CA-G.R. SP No.
65425.

Due to the adverse effects of the Asian economic crisis on the construction industry beginning 1997,
petitioner Jackbilt Industries, Inc. decided to temporarily stop its business of producing concrete
hollow blocks, compelling most of its employees to go on leave for six months.4

Respondent Jackbilt Employees Workers Union-NAFLU-KMU immediately protested the temporary

shutdown. Because its collective bargaining agreement with petitioner was expiring during the period
of the shutdown, respondent claimed that petitioner halted production to avoid its duty to bargain
collectively. The shutdown was allegedly motivated by anti-union sentiments.

Accordingly, on March 9, 1998, respondent went on strike. Its officers and members picketed
petitioner's main gates and deliberately prevented persons and vehicles from going into and out of
the compound.

On March 19, 1998, petitioner filed a petition for injunction5 with a prayer for the issuance of a
temporary restraining order (TRO) in the National Labor Relations Commission (NLRC). It sought to
enjoin respondent from obstructing free entry to and exit from its production facility.6

On April 14, 1998, the NLRC issued a TRO directing the respondents to refrain from preventing
access to petitioner's property.

The reports of both the implementing officer and the investigating labor arbiter revealed, however,
that respondent union violated the April 14, 1998 order. Union members, on various occasions,
stopped and inspected private vehicles entering and exiting petitioner's production facility. Thus, in a
decision dated July 17, 1998, the NLRC ordered the issuance of a writ of preliminary injunction.7

Meanwhile, petitioner sent individual memoranda to the officers and members of respondent who
participated in the strike8 ordering them to explain why they should not be dismissed for committing
illegal acts in the course of a strike.9 However, respondent repeatedly ignored petitioner's
memoranda despite the extensions granted.10 Thus, on May 30, 1998, petitioner dismissed the
concerned officers and members and barred them from entering its premises effective June 1, 1998.

Aggrieved, respondent filed complaints for illegal lockout, runaway shop and damages,11 unfair labor
practice, illegal dismissal and attorney's fees,12 and refusal to bargain13 on behalf of its officers and
members against petitioner and its corporate officers. It argued that there was no basis for the
temporary partial shutdown as it was undertaken by petitioner to avoid its duty to bargain
collectively.

Petitioner, on the other hand, asserted that because respondent conducted a strike without observing
the procedural requirements provided in Article 263 of the Labor Code,14 the March 9, 1998 strike
was illegal. Furthermore, in view of the July 17, 1998 decision of the NLRC (which found that
Labor II – 1
respondent obstructed the free ingress to and egress from petitioner's premises), petitioner validly
dismissed respondent's officers and employees for committing illegal acts in the course of a strike.

In a decision dated October 15, 1999, 15 the labor arbiter dismissed the complaints for illegal lockout
and unfair labor practice for lack of merit. However, because petitioner did not file a petition to
declare the strike illegal16 before terminating respondent's officers and employees, it was found guilty
of illegal dismissal. The dispositive portion of the decision read:

WHEREFORE, judgment is hereby rendered finding [petitioner and its corporate officers] liable for
the illegal dismissal of the 61 union officer and members of [respondent] and concomitantly,
[petitioner and its corporate officers] are hereby jointly and severally ordered to pay [respondents'
officers and members] limited backwages from June 1, 1998 to October 4, 1998.

[Petitioner and its corporate officers] are further ordered to pay [respondents' officers and members]
separation pay based on - salary for every year of credited service, a fraction of at least 6 months to
be considered as one whole year in lieu of reinstatement.

The complaint for unfair labor practice, moral and exemplary damages and runaway shop are hereby
disallowed for lack of merit.

SO ORDERED.

On December 28, 2000, the NLRC, on appeal, modified the decision of the labor arbiter. It held that
only petitioner should be liable for monetary awards granted to respondent's officers and members.17

Both petitioner and respondent moved for reconsideration but they were denied for lack of merit.18

Aggrieved, petitioner assailed the December 28, 2000 decision of the NLRC via a petition
for certiorari 19 in the CA. It asserted that the NLRC committed grave abuse of discretion in
disregarding its July 17, 1998 decision20 wherein respondent's officers and employees were found to
have committed illegal acts in the course of the March 9, 1998 strike. In view thereof and pursuant
to Article 264(a)(3) of the Labor Code,21 petitioner validly terminated respondent's officers and
employees.

The CA dismissed the petition but modified the December 28, 2000 decision of the NLRC.22 Because
most of affected employees were union members, the CA held that the temporary shutdown was
moved by anti-union sentiments. Petitioner was therefore guilty of unfair labor practice and,
consequently, was ordered to pay respondent's officers and employees backwages from March 9,
1998 (instead of June 1, 1998) to October 4, 1998 and separation pay of one month salary for every
year of credited service.

Petitioner moved for reconsideration but it was denied.23 Thus, this recourse.

The primordial issue in this petition is whether or not the filing of a petition with the labor arbiter to
declare a strike illegal is a condition sine qua non for the valid termination of employees who commit
an illegal act in the course of such strike.

Petitioner asserts that the filing of a petition to declare the strike illegal was unnecessary since the
NLRC, in its July 17, 1998 decision, had already found that respondent committed illegal acts in the
course of the strike.

We grant the petition.

Labor II – 1
The principle of conclusiveness of judgment, embodied in Section 47(c), Rule 39 of the Rules of
Court,24 holds that the parties to a case are bound by the findings in a previous judgment with
respect to matters actually raised and adjudged therein.25

Article 264(e) of the Labor Code prohibits any person engaged in picketing from obstructing the free
ingress to and egress from the employer's premises. Since respondent was found in the July 17,
1998 decision of the NLRC to have prevented the free entry into and exit of vehicles from petitioner's
compound, respondent's officers and employees clearly committed illegal acts in the course of the
March 9, 1998 strike.ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

The use of unlawful means in the course of a strike renders such strike illegal.26 Therefore, pursuant
to the principle of conclusiveness of judgment, the March 9, 1998 strike was ipso facto illegal. The
filing of a petition to declare the strike illegal was thus unnecessary.

Consequently, we uphold the legality of the dismissal of respondent's officers and employees. Article
264 of the Labor Code27 further provides that an employer may terminate employees found to have
committed illegal acts in the course of a strike.28 Petitioner clearly had the legal right to terminate
respondent's officers and employees.29

WHEREFORE, the petition is hereby granted. The July 13, 2005 decision and February 9, 2006
resolution of the Court of Appeals in CA-G.R. SP No. 65208 and CA-G.R. SP No. 65425 are
hereby REVERSED and SET ASIDE.

The December 28, 2000 and March 6, 2001 resolutions of the National Labor Relations Commission in
NLRC-CA No. 022614-2000 are MODIFIED insofar as they affirmed the October 15, 1999 decision of
the labor arbiter in NLRC-NCR-Case No. 00-06-05017-98 finding petitioner Jackbilt Industries, Inc.
guilty of illegal dismissal for terminating respondent's officers and employees. New judgment is
hereby entered DISMISSING NLRC-NCR-Case No. 00-06-05017-98 for lack of merit.

Labor II – 1
60.) G.R. No. 160302               September 27, 2010

JAILE OLISA, ISIDRO SANCHEZ, ANTONIO SARCIA, OSCAR CONTRERAS, ROMEO ZAMORA, MARIANO
GAGAL, ROBERTO MARTIZANO, DOMINGO SANTILLICES, ARIEL ESCARIO, HEIRS OF FELIX LUCIANO,
AND MALAYANG SAMAHAN NG MGA MANGGAGAWA SA BALANCED FOODS, Petitioners,
vs.
DANILO ESCARIO, PANFILO AGAO, ARSENIO AMADOR, ELMER COLICO, ROMANO DELUMEN,
DOMINADOR AGUILO, OLYMPIO GOLOSINO, RICARDO LABAN, LORETO MORATA, ROBERTO TIGUE,
GILBERT VIBAR, THOMAS MANCILLA, JR., NESTOR LASTIMOSO, JIMMY MIRABALLES, NATIONAL LABOR
RELATIONS COMMISSION (THIRD DIVISION), PINAKAMASARAP CORPORATION, DR. SY LIAN TIN, AND
DOMINGO TAN, Respondents.

DECISION

BERSAMIN, J.:

Conformably with the long honored principle of a fair day’s wage for a fair day’s labor, employees dismissed for
joining an illegal strike are not entitled to backwages for the period of the strike even if they are reinstated by virtue
of their being merely members of the striking union who did not commit any illegal act during the strike.

We apply this principle in resolving this appeal via a petition for review on certiorari of the decision dated August 18,
2003 of the Court of Appeals (CA),1 affirming the decision dated November 29, 2001 rendered by the National Labor
Relations Commission (NLRC) directing their reinstatement of the petitioners to their former positions without
backwages, or, in lieu of reinstatement, the payment of separation pay equivalent to one-half month per year of
service.2

Antecedents

The petitioners were among the regular employees of respondent Pinakamasarap Corporation (PINA), a corporation
engaged in manufacturing and selling food seasoning. They were members of petitioner Malayang Samahan ng
mga Manggagawa sa Balanced Foods (Union).

At 8:30 in the morning of March 13, 1993, all the officers and some 200 members of the Union walked out of PINA’s
premises and proceeded to the barangay office to show support for Juanito Cañete, an officer of the Union charged
with oral defamation by Aurora Manor, PINA’s personnel manager, and Yolanda Fabella, Manor’s secretary.3 It
appears that the proceedings in the barangay resulted in a settlement, and the officers and members of the Union
all returned to work thereafter.

As a result of the walkout, PINA preventively suspended all officers of the Union because of the March 13, 1993
incident. PINA terminated the officers of the Union after a month.

On April 14, 1993, PINA filed a complaint for unfair labor practice (ULP) and damages. The complaint was assigned
to then Labor Arbiter Raul Aquino, who ruled in his decision dated July 13, 1994 that the March 13, 1993 incident
was an illegal walkout constituting ULP; and that all the Union’s officers, except Cañete, had thereby lost their
employment.4

On April 28, 1993, the Union filed a notice of strike, claiming that PINA was guilty of union busting through the
constructive dismissal of its officers.5 On May 9, 1993, the Union held a strike vote, at which a majority of 190
members of the Union voted to strike.6 The strike was held in the afternoon of June 15, 1993.7

PINA retaliated by charging the petitioners with ULP and abandonment of work, stating that they had violated
provisions on strike of the collective bargaining agreement (CBA), such as: (a) sabotage by the insertion of foreign
matter in the bottling of company products; (b) decreased production output by slowdown; (c) serious misconduct,
and willful disobedience and insubordination to the orders of the Management and its representatives; (d) disruption
of the work place by invading the premises and perpetrating commotion and disorder, and by causing fear and
Labor II – 1
apprehension; (e) abandonment of work since June 28, 1993 despite notices to return to work individually sent to
them; and (f) picketing within the company premises on June 15, 1993 that effectively barred with the use of threat
and intimidation the ingress and egress of PINA’s officials, employees, suppliers, and customers. 8

On September 30, 1994, the Third Division of the National Labor Relations Commission (NLRC) issued a temporary
restraining order (TRO), enjoining the Union’s officers and members to cease and desist from barricading and
obstructing the entrance to and exit from PINA’s premises, to refrain from committing any and all forms of violence,
and to remove all forms of obstructions such as streamers, placards, or human barricade.9

On November 29, 1994, the NLRC granted the writ of preliminary injunction.10

On August 18, 1998, Labor Arbiter Jose G. de Vera (LA) rendered a decision, to wit:

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered declaring the subject
strike to be illegal.

The complainant’s prayer for decertification of the respondent union being outside of the jurisdiction of this
Arbitration Branch may not be given due course.

And finally, the claims for moral and exemplary damages for want of factual basis are dismissed.

SO ORDERED.11

On appeal, the NLRC sustained the finding that the strike was illegal, but reversed the LA’s ruling that there was
abandonment, viz:

However, we disagree with the conclusion that respondents’ union members should be considered to have
abandoned their employment.

Under Article 264 of the Labor Code, as amended, the union officers who knowingly participate in the illegal strike
may be declared to have lost their employment status. However, mere participation of a union member in the illegal
strike does not mean loss of employment status unless he participates in the commission of illegal acts during the
strike. While it is true that complainant thru individual memorandum directed the respondents to return to work (pp.
1031-1112, Records) there is no showing that respondents deliberately refused to return to work. A worker who
joins a strike does so precisely to assert or improve the terms and conditions of his work. If his purpose is to
abandon his work, he would not go to the trouble of joining a strike (BLTB v. NLRC, 212 SCRA 794).

WHEREFORE, premises considered, the Decision appealed from is hereby MODIFIED in that complainant
company is directed to reinstate respondents named in the complaint to their former positions but without
backwages. In the event that reinstatement is not feasible complainant company is directed to pay respondents
separation pay at one (1/2) half month per year of service.

SO ORDERED.12

Following the denial of their motion for reconsideration, the petitioners assailed the NLRC’s decision through a
petition for certiorari in the Court of Appeals (CA), claiming that the NLRC gravely abused its discretion in not
awarding backwages pursuant to Article 279 of the Labor Code, and in not declaring their strike as a good faith
strike.

On August 18, 2003, the CA affirmed the NLRC.13 In denying the petitioners’ claim for full backwages, the CA
applied the third paragraph of Article 264(a) instead of Article 279 of the Labor Code, explaining that the only
instance under Article 264 when a dismissed employee would be reinstated with full backwages was when he was
dismissed by reason of an illegal lockout; that Article 264 was silent on the award of backwages to employees
participating in a lawful strike; and that a reinstatement with full backwages would be granted only when the
dismissal of the petitioners was not done in accordance with Article 282 (dismissals with just causes) and Article 283
(dismissals with authorized causes) of the Labor Code.
Labor II – 1
The CA disposed thus:14

WHEREFORE, premises considered, the Petition is DISMISSED for lack of merit and the assailed 29 November
2001 Decision of respondent Commission in NLRC NRC CA No. 009701-95 is hereby AFFIRMED in toto. No costs.

SO ORDERED.15

On October 13, 2003, the CA denied the petitioners’ motion for reconsideration.16

Hence, this appeal via petition for review on certiorari.

Issue

The petitioners posit that they are entitled to full backwages from the date of dismissal until the date of actual
reinstatement due to their not being found to have abandoned their jobs. They insist that the CA decided the
question in a manner contrary to law and jurisprudence.

Ruling

We sustain the CA, but modify the decision on the amount of the backwages in order to accord with equity and
jurisprudence.

Third Paragraph of Article 264 (a), >Labor Code, is Applicable

The petitioners contend that they are entitled to full backwages by virtue of their reinstatement, and submit that
applicable to their situation is Article 279, not the third paragraph of Article 264(a), both of the Labor Code.

We do not agree with the petitioners.

Article 279 provides:

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

By its use of the phrase unjustly dismissed, Article 279 refers to a dismissal that is unjustly done, that is, the
employer dismisses the employee without observing due process, either substantive or procedural. Substantive due
process requires the attendance of any of the just or authorized causes for terminating an employee as provided
under Article 278 (termination by employer), or Article 283 (closure of establishment and reduction of personnel), or
Article 284 (disease as ground for termination), all of the Labor Code; while procedural due process demands
compliance with the twin-notice requirement.17

In contrast, the third paragraph of Article 264(a) states:

Art. 264. Prohibited activities. – (a) xxx

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 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 his employment status; Provided, That mere participation of a worker in a lawful strike shall not constitute

Labor II – 1
sufficient ground for termination of his employment, even if a replacement had been hired by the employer during
such lawful strike.

xxx

Contemplating two causes for the dismissal of an employee, that is: (a) unlawful lockout; and (b) participation in an
illegal strike, the third paragraph of Article 264(a) authorizes the award of full backwages only when the termination
of employment is a consequence of an unlawful lockout. On the consequences of an illegal strike, the provision
distinguishes between a union officer and a union member participating in an illegal strike. A union officer who
knowingly participates in an illegal strike is deemed to have lost his employment status, but a union member who is
merely instigated or induced to participate in the illegal strike is more benignly treated. Part of the explanation for the
benign consideration for the union member is the policy of reinstating rank-and-file workers who are misled into
supporting illegal strikes, absent any finding that such workers committed illegal acts during the period of the illegal
strikes.18

The petitioners were terminated for joining a strike that was later declared to be illegal. The NLRC ordered their
reinstatement or, in lieu of reinstatement, the payment of their separation pay, because they were mere rank-and-
file workers whom the Union’s officers had misled into joining the illegal strike. They were not unjustly dismissed
from work. Based on the text and intent of the two aforequoted provisions of the Labor Code, therefore, it is plain
that Article 264(a) is the applicable one.

II

Petitioners not entitled to backwages despite their reinstatement:

A fair day’s wage for a fair day’s labor

The petitioners argue that the finding of no abandonment equated to a finding of illegal dismissal in their favor.
Hence, they were entitled to full backwages.

The petitioners’ argument cannot be sustained.

The petitioners’ participation in the illegal strike was precisely what prompted PINA to file a complaint to declare
them, as striking employees, to have lost their employment status. However, the NLRC ultimately ordered their
reinstatement after finding that they had not abandoned their work by joining the illegal strike. They were thus
entitled only to reinstatement, regardless of whether or not the strike was the consequence of the employer’s
ULP,19 considering that a strike was not a renunciation of the employment relation.20

As a general rule, backwages are granted to indemnify a dismissed employee for his loss of earnings during the
whole period that he is out of his job. Considering that an illegally dismissed employee is not deemed to have left his
employment, he is entitled to all the rights and privileges that accrue to him from the employment.21 The grant of
backwages to him is in furtherance and effectuation of the public objectives of the Labor Code, and is in the nature
of a command to the employer to make a public reparation for his illegal dismissal of the employee in violation of the
Labor Code.22

That backwages are not granted to employees participating in an illegal strike simply accords with the reality that
they do not render work for the employer during the period of the illegal strike.23 According to G&S Transport
Corporation v. Infante:24

With respect to backwages, the principle of a "fair day’s wage for a fair day’s labor" remains as the basic factor in
determining the award thereof. If there is no work performed by the employee there can be no wage or pay unless,
of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed or
otherwise illegally prevented from working. xxx In Philippine Marine Officers’ Guild v. Compañia Maritima, as
affirmed in Philippine Diamond Hotel and Resort v. Manila Diamond Hotel Employees Union, the Court stressed that
for this exception to apply, it is required that the strike be legal, a situation that does not obtain in the case at bar.
(emphasis supplied)

Labor II – 1
The petitioners herein do not deny their participation in the June 15, 1993 strike. As such, they did not suffer any
loss of earnings during their absence from work. Their reinstatement sans backwages is in order, to conform to the
policy of a fair day’s wage for a fair day’s labor.

Under the principle of a fair day’s wage for a fair day’s labor, the petitioners were not entitled to the wages during
the period of the strike (even if the strike might be legal), because they performed no work during the strike. Verily, it
was neither fair nor just that the dismissed employees should litigate against their employer on the latter’s
time.25 Thus, the Court deleted the award of backwages and held that the striking workers were entitled only to
reinstatement in Philippine Diamond Hotel and Resort, Inc. (Manila Diamond Hotel) v. Manila Diamond Hotel
Employees Union,26 considering that the striking employees did not render work for the employer during the strike.

III

Appropriate Amount for Separation Pay

Is One Month per Year of Service

The petitioners were ordered reinstated because they were union members merely instigated or induced to
participate in the illegal strike. By joining the strike, they did not renounce their employment relation with PINA but
remained as its employees.

The absence from an order of reinstatement of an alternative relief should the employer or a supervening event not
within the control of the employee prevent reinstatement negates the very purpose of the order. The judgment
favorable to the employee is thereby reduced to a mere paper victory, for it is all too easy for the employer to simply
refuse to have the employee back. To safeguard the spirit of social justice that the Court has advocated in favor of
the working man, therefore, the right to reinstatement is to be considered renounced or waived only when the
employee unjustifiably or unreasonably refuses to return to work upon being so ordered or after the employer has
offered to reinstate him.27

However, separation pay is made an alternative relief in lieu of reinstatement in certain circumstances, like: (a) when
reinstatement can no longer be effected in view of the passage of a long period of time or because of the realities of
the situation; (b) reinstatement is inimical to the employer’s interest; (c) reinstatement is no longer feasible; (d)
reinstatement does not serve the best interests of the parties involved; (e) the employer is prejudiced by the
workers’ continued employment; (f) facts that make execution unjust or inequitable have supervened; or (g) strained
relations between the employer and employee.28

Here, PINA manifested that the reinstatement of the petitioners would not be feasible because: (a) it would "inflict
disruption and oppression upon the employer"; (b) "petitioners [had] stayed away" for more than 15 years; (c) its
machines had depreciated and had been replaced with newer, better ones; and (d) it now sold goods through
independent distributors, thereby abolishing the positions related to sales and distribution.29

Under the circumstances, the grant of separation pay in lieu of reinstatement of the petitioners was proper.  It is not
1awph!1

disputable that the grant of separation pay or some other financial assistance to an employee is based on equity,
which has been defined as justice outside law, or as being ethical rather than jural and as belonging to the sphere of
morals than of law.30 This Court has granted separation pay as a measure of social justice even when an employee
has been validly dismissed, as long as the dismissal has not been due to serious misconduct or reflective of
personal integrity or morality.31

What is the appropriate amount for separation pay?

In G & S Transport,32 the Court awarded separation pay equivalent to one month salary per year of service
considering that 17 years had passed from the time when the striking employees were refused reinstatement. In
Association of Independent Unions in the Philippines v. NLRC,33 the Court allowed separation pay equivalent to one
month salary per year of service considering that eight years had elapsed since the employees had staged their
illegal strike.

Labor II – 1
Here, we note that this case has dragged for almost 17 years from the time of the illegal strike. Bearing in mind
PINA’s manifestation that the positions that the petitioners used to hold had ceased to exist for various reasons, we
hold that separation pay equivalent to one month per year of service in lieu of reinstatement fully aligns with the
aforecited rulings of the Court on the matter.

WHEREFORE, we affirm the decision dated August 18, 2003 of the Court of Appeals, subject to the modification to
the effect that in lieu of reinstatement the petitioners are granted backwages equivalent of one month for every year
of service.

Labor II – 1
61.) G.R. No. 154113               December 7, 2011

EDEN GLADYS ABARIA, ROMULO ALFORQUE, ELENA ALLA, EVELYN APOSTOL, AMELIA ARAGON,
BEATRIZ ALBASTRO, GLORIA ARDULLES, GLENDA BANTILAN, VIRGILIE BORINAGA, ROLDAN
CALDERON, ILDEBRANDO CUTA, ROMEO EMPUERTO, LANNIE FERNANDEZ, LUCINELL GABAYERON,
JESUSA GERONA, JOSE GONZAGA, TEOFILO HINAMPAS, JOSEFINA IBUNA, MARLYN LABRA, MARIA
CARMENCITA LAO, ERA CANEN, RODNEY REX LERIAS, ERNIE MANLIGAS, JOHANNE DEL MAR, RUBY
ORIMACO, CONSTANCIO PAGADOR, MARVELOUS PANAL, NOLAN PANAL, LILLAN PETALLAR, GERNA
PATIGDAS, MELODIA PAULIN, SHIRLEY ROSE REYES, JOSEFINA REYES, OSCAR DE LOS SANTOS,
SOLOMON DE LOS SANTOS, RAMON TAGNIPIS, BERNADETTE TIBAY, RONALD TUMULAK, LEONCIO
VALLINAS, EDELBERTO VILLA and the NAGKAHIUSANG MAMUMUO SA METRO CEBU COMMUNITY
HOSPITAL, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, METRO CEBU COMMUNITY HOSPITAL, INC., ITS BOARD OF
TRUSTEES, REV. GREGORIO IYOY, SHIELA BUOT, REV. LORENZO GENOTIVA, RUBEN CARABAN, RUBEN
ESTOYE, LILIA SAURO, REV. ELIZER BERTOLDO, RIZALINA VILLAGANTE, DRA. LUCIA FLORENDO,
CONCEPCION VILLEGAS, REV. OLIVER CANEN, DRA. CYD RAGAS, REV. MIKE CAMBA, AVEDNIGO
VALIENTE, RIZALINO TAGANAS, CIRIACO PONGASI, ISIAS WAGAS, REV. ESTER GELOAGAN, REV. LEON
MANIWAN, CRESENTE BAOAS, WINEFREDA BARLOSO, REV. RUEL MARIGA AND THE UNITED CHURCH
OF CHRIST IN THE PHILIPPINES, REV. HILARIO GOMEZ, REV. ELMER BOLOCON, THE NATIONAL
FEDERATION OF LABOR AND ARMAND ALFORQUE, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 187778

PERLA NAVA, DANIELA YOSORES, AGUSTIN ALFORNON, AILEEN CATACUTAN, ROLANDO REDILOSA,
CORNELIO MARIBOJO, VIRGENCITA CASAS, CRISANTA GENEGABOAS, EMILIO LAO, RICO GASCON,
ALBINA BAÑEZ, PEDRO CABATINGAN, PROCOMIO SALUPAN, ELIZABETH RAMON, DIOSCORO
GABUNADA, ROY MALAZARTE, FELICIANITA MALAZARTE, NORBERTA CACA, MILAGROS CASTILLO,
EDNA ALBO, BERNABE LUMAPGUID, CELIA SABAS, SILVERIO LAO, DARIO LABRADOR, ERNESTO
CANEN, JR., ELSA BUCAO, HANNAH BONGCARAS, NEMA BELOCURA, PEPITO LLAGAS, GUILLERMA
REMOCALDO, ROGELIO DABATOS, ROBERTO JAYMA, RAYMUNDO DELATADO, MERLYN NODADO, NOEL
HORTELANO, HERMELO DELA TORRE, LOURDES OLARTE, DANILO ZAMORA, LUZ CABASE, CATALINA
ALSADO, RUTH BANZON AND THE NAGKAHIUSANG MAMUMUO SA METRO CEBU COMMUNITY
HOSPITAL, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (FOURTH DIVISION), METRO CEBU COMMUNITY HOSPITAL,
INC., BOARD OF TRUSTEES, REV. GREGORIO IYOY, SHIELA BUOT, REV. LORENZO GENOTIVA, RUBEN
CABABAN, ROSENDO ESTOYE, LILIA SAURO, REV. ELIZER BERTOLDO, RIZALINA VILLAGANTE, DRA.
LUCIA FLORENDO, CONCEPCION VILLEGAS, REV. OLIVER CANEN, DRA. CYD RAAGAS, REV. MIKE
CAMBA, AVIDNIGO VALIENTE, RIZALINO TAGANAS, CIRIACO PONGASI, ISIAS WAGAS, REV. ESTER
GELOAGAN, REV. LEON MANIWAN, CRESENTE BAOAS, WINIFREDA BARLOSO, REV. RUEL MARIGA, THE
UNITED CHURCH OF CHRIST IN THE PHILIPPINES, REV. HILARIO GOMEZ, REV. ELMER BOLOCON, THE
NATIONAL FEDERATION OF LABOR AND ARMANDO ALFORQUE, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 187861

METRO CEBU COMMUNITY HOSPITAL, presently known as Visayas Community Medical Center
(VCMC), Petitioner,
vs.
PERLA NAVA, DANIELA YOSORES, AGUSTIN ALFORNON, AILEEN CATACUTAN, ROLANDO REDILOSA,
CORNELIO MARIBOJO, VIRGENCITA CASAS, CRISANTA GENEGABOAS, EMILIO LAO, RICO GASCON,
ALBINA BANEZ, PEDRO CABATINGAN, PROCOMIO SALUPAN, ELIZABETH RAMON, DIOSCORO
Labor II – 1
GABUNADA, ROY MALAZARTE, FELICIANITA MALAZARTE, NORBERTA CACA, MILAGROS CASTILLO,
EDNA ALBO, BERNABE LUMABGUID, CELIA SABAS, SILVERIO LAO, DARIO LABRADOR, ERNESTO
CANEN, JR., ELSA BUCAO, HANNAH BONGCARAS, NEMA BELOCURA, PEPITO LLAGAS, GUILLERMA
REMOCALDO, ROGELIO DABATOS, ROBERTO JAYMA, RAYMUNDO DELATADO, NOEL HORTELANO,
HERMELO DE LA TORRE, LOURDES OLARTE, DANILO ZAMORA, LUZ CABASE, CATALINA ALSADO AND
RUTH BANZON, Respondents.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 196156

VISAYAS COMMUNITY MEDICAL CENTER (VCMC) formerly known as METRO CEBU COMMUNITY
HOSPITAL (MCCH), Petitioner,
vs.
ERMA YBALLE, NELIA ANGEL, ELEUTERIA CORTEZ and EVELYN ONG, Respondents.

DECISION

VILLARAMA, JR., J.:

The consolidated petitions before us involve the legality of mass termination of hospital employees who participated
in strike and picketing activities.

The factual antecedents:

Metro Cebu Community Hospital, Inc. (MCCHI), presently known as the Visayas Community Medical Center
(VCMC), is a non-stock, non-profit corporation organized under the laws of the Republic of the Philippines. It
operates the Metro Cebu Community Hospital (MCCH), a tertiary medical institution located at Osmeña Boulevard,
Cebu City. MCCH is owned by the United Church of Christ in the Philippines (UCCP) and Rev. Gregorio P. Iyoy is
the Hospital Administrator.

The National Federation of Labor (NFL) is the exclusive bargaining representative of the rank-and-file employees of
MCCHI. Under the 1987 and 1991 Collective Bargaining Agreements (CBAs), the signatories were Ciriaco B.
Pongasi, Sr. for MCCHI, and Atty. Armando M. Alforque (NFL Legal Counsel) and Paterno A. Lumapguid as
President of NFL-MCCH Chapter. In the CBA effective from January 1994 until December 31, 1995, the signatories
were Sheila E. Buot as Board of Trustees Chairman, Rev. Iyoy as MCCH Administrator and Atty. Fernando Yu as
Legal Counsel of NFL, while Perla Nava, President of Nagkahiusang Mamumuo sa MCCH (NAMA-MCCH-NFL)
signed the Proof of Posting.1

On December 6, 1995, Nava wrote Rev. Iyoy expressing the union’s desire to renew the CBA, attaching to her letter
a statement of proposals signed/endorsed by 153 union members. Nava subsequently requested that the following
employees be allowed to avail of one-day union leave with pay on December 19, 1995: Celia Sabas, Jesusa
Gerona, Albina Bañez, Eddie Villa, Roy Malazarte, Ernesto Canen, Jr., Guillerma Remocaldo, Catalina Alsado,
Evelyn Ong, Melodia Paulin, Sofia Bautista, Hannah Bongcaras, Ester Villarin, Iluminada Wenceslao and Perla
Nava. However, MCCHI returned the CBA proposal for Nava to secure first the endorsement of the legal counsel of
NFL as the official bargaining representative of MCCHI employees.2

Meanwhile, Atty. Alforque informed MCCHI that the proposed CBA submitted by Nava was never referred to NFL
and that NFL has not authorized any other legal counsel or any person for collective bargaining negotiations. By
January 1996, the collection of union fees (check-off) was temporarily suspended by MCCHI in view of the existing
conflict between the federation and its local affiliate. Thereafter, MCCHI attempted to take over the room being used
as union office but was prevented to do so by Nava and her group who protested these actions and insisted that
management directly negotiate with them for a new CBA. MCCHI referred the matter to Atty. Alforque, NFL’s
Regional Director, and advised Nava that their group is not recognized by NFL.3

Labor II – 1
In his letter dated February 24, 1996 addressed to Nava, Ernesto Canen, Jr., Jesusa Gerona, Hannah Bongcaras,
Emma Remocaldo, Catalina Alsado and Albina Bañez, Atty. Alforque suspended their union membership for serious
violation of the Constitution and By-Laws. Said letter states:

During the last General Membership Meeting of the union on February 20, 1996, you openly declared that you
recognized the officers of the KMU not those of the NFL, that you submit to the stuctures [sic] and authority of the
KMU not of the NFL, and that you are loyal only to the KMU not to the NFL.

Also, in the same meeting, you admitted having sent a proposal for a renewed collective bargaining agreement to
the management without any consultation with the NFL. In fact, in your letter dated February 21, 1996 addressed to
Rev. Gregorio Iyoy, the Administrator of the hospital, you categorically stated as follows: "We do not need any
endorsement from NFL, more particularly from Atty. Armando Alforque to negotiate our CBA with MCCH." You did
not only ignore the authority of the undersigned as Regional Director but you maliciously prevented and bluntly
refused my request to join the union negotiating panel in the CBA negotiations.

Your above flagrant actuations, made in the presence of the union membership, constitute the following offenses:

1. Willful violation of the Constitution and By-Laws of the Federation and the orders and decisions of duly
constituted authorities of the same (Section 4 (b), Article III), namely:

a) Defying the decision of the organization disaffiliating from the KMU; and

b) Section 9 (b), Article IX which pertains to the powers and responsibilities of the Regional Director,
particularly, to negotiate and sign collective bargaining agreement together with the local negotiating
panel subject to prior ratification by the general membership;

2. Joining or assisting another labor organization or helping in the formation of a new labor organization that
seeks or tends to defeat the purpose of the Federation (Section 4 (d), Article III) in relation to the National
Executive Board’s Resolution No. 8, September 26-27, 1994, to wit:

"Pursuant to the NEB Resolution disaffiliating from the KMU dated September 11, 1993, the NEB in session hereby
declare that KMU is deemed an organization that seeks to defeat the objective of establishing independent and
democratic unions and seeks to replace the Federation as exclusive representative of its members.

Committing acts that tend to alienate the loyalty of the members to the Federation, subvert its duly constituted
authorities, and divide the organization in any level with the objective of establishing a pro-KMU faction or
independent union loyal to the KMU shall be subject to disciplinary action, suspension or expulsion from union
membership, office or position in accordance with paragraph[s] d and f of Section 4, Article III, and paragraph h,
Section 6, Article VI, paragraph d, Section 9, Article IX."

You are, therefore, directed to submit written explanation on the above charges within five (5) days from receipt
hereof. Failure on your part shall be considered a waiver of your right to be heard and the Federation will act
accordingly.

Considering the gravity of the charges against you, the critical nature of the undertaking to renew the collective
bargaining agreement, and the serious threat you posed to the organization, you are hereby placed under
temporary suspension from your office and membership in the union immediately upon receipt hereof pending
investigation and final disposition of your case in accordance with the union’s constitution and by-laws.

For your guidance and compliance.4

On February 26, 1996, upon the request of Atty. Alforque, MCCHI granted one-day union leave with pay for 12
union members.5 The next day, several union members led by Nava and her group launched a series of mass
actions such as wearing black and red armbands/headbands, marching around the hospital premises and putting up
placards, posters and streamers. Atty. Alforque immediately disowned the concerted activities being carried out by
union members which are not sanctioned by NFL. MCCHI directed the union officers led by Nava to submit within 48
Labor II – 1
hours a written explanation why they should not be terminated for having engaged in illegal concerted activities
amounting to strike, and placed them under immediate preventive suspension. Responding to this directive, Nava
and her group denied there was a temporary stoppage of work, explaining that employees wore their armbands only
as a sign of protest and reiterating their demand for MCCHI to comply with its duty to bargain collectively. Rev. Iyoy,
having been informed that Nava and her group have also been suspended by NFL, directed said officers to appear
before his office for investigation in connection with the illegal strike wherein they reportedly uttered slanderous and
scurrilous words against the officers of the hospital, threatening other workers and forcing them to join the strike.
Said union officers, however, invoked the grievance procedure provided in the CBA to settle the dispute between
management and the union.6

On March 13 and 19, 1996, the Department of Labor and Employment (DOLE) Regional Office No. 7 issued
certifications stating that there is nothing in their records which shows that NAMA-MCCH-NFL is a registered labor
organization, and that said union submitted only a copy of its Charter Certificate on January 31, 1995.7 MCCHI then
sent individual notices to all union members asking them to submit within 72 hours a written explanation why they
should not be terminated for having supported the illegal concerted activities of NAMA-MCCH-NFL which has no
legal personality as per DOLE records. In their collective response/statement dated March 18, 1996, it was
explained that the picketing employees wore armbands to protest MCCHI’s refusal to bargain; it was also contended
that MCCHI cannot question the legal personality of the union which had actively assisted in CBA negotiations and
implementation.8

On March 13, 1996, NAMA-MCCH-NFL filed a Notice of Strike but the same was deemed not filed for want of legal
personality on the part of the filer. The National Conciliation and Mediation Board (NCMB) Region 7 office likewise
denied their motion for reconsideration on March 25, 1996. Despite such rebuff, Nava and her group still conducted
a strike vote on April 2, 1996 during which an overwhelming majority of union members approved the strike.9

Meanwhile, the scheduled investigations did not push through because the striking union members insisted on
attending the same only as a group. MCCHI again sent notices informing them that their refusal to submit to
investigation is deemed a waiver of their right to explain their side and management shall proceed to impose proper
disciplinary action under the circumstances. On March 30, 1996, MCCHI sent termination letters to union leaders
and other members who participated in the strike and picketing activities. On April 8, 1996, it also issued a cease-
and-desist order to the rest of the striking employees stressing that the wildcat concerted activities spearheaded by
the Nava group is illegal without a valid Notice of Strike and warning them that non-compliance will compel
management to impose disciplinary actions against them. For their continued picketing activities despite the said
warning, more than 100 striking employees were dismissed effective April 12 and 19, 1996.

Unfazed, the striking union members held more mass actions. The means of ingress to and egress from the hospital
were blocked so that vehicles carrying patients and employees were barred from entering the premises. Placards
were placed at the hospital’s entrance gate stating: "Please proceed to another hospital" and "we are on protest."
Employees and patients reported acts of intimidation and harassment perpetrated by union leaders and members.
With the intensified atmosphere of violence and animosity within the hospital premises as a result of continued
protest activities by union members, MCCHI suffered heavy losses due to low patient admission rates. The
hospital’s suppliers also refused to make further deliveries on credit.

With the volatile situation adversely affecting hospital operations and the condition of confined patients, MCCHI filed
a petition for injunction in the NLRC (Cebu City) on July 9, 1996 (Injunction Case No. V-0006-96). A temporary
restraining order (TRO) was issued on July 16, 1996. MCCHI presented 12 witnesses (hospital employees and
patients), including a security guard who was stabbed by an identified sympathizer while in the company of Nava’s
group. MCCHI’s petition was granted and a permanent injunction was issued on September 18, 1996 enjoining the
Nava group from committing illegal acts mentioned in Art. 264 of the Labor Code.10

On August 27, 1996, the City Government of Cebu ordered the demolition of the structures and obstructions put up
by the picketing employees of MCCHI along the sidewalk, having determined the same as a public nuisance or
nuisance per se.11

Thereafter, several complaints for illegal dismissal and unfair labor practice were filed by the terminated employees
against MCCHI, Rev. Iyoy, UCCP and members of the Board of Trustees of MCCHI.

Labor II – 1
On August 4, 1999, Executive Labor Arbiter Reynoso A. Belarmino rendered his decision12 dismissing the
complaints for unfair labor practice in NLRC Case Nos. RAB-VII-02-0309-98, RAB-VII-02-0394-98 and RAB-VII-03-
0596-98 filed by Nava and 90 other complainants. Executive Labor Arbiter Belarmino found no basis for the charge
of unfair labor practice and declared the strike and picketing activities illegal having been conducted by NAMA-
MCCH-NFL which is not a legitimate labor organization. The termination of union leaders Nava, Alsado, Bañez,
Bongcaras, Canen, Gerona and Remocaldo were upheld as valid but MCCHI was directed to grant separation pay
equivalent to one-half month for every year of service, in the total amount of ₱3,085,897.40 for the 84
complainants.13

Complainants appealed to the Commission. On March 14, 2001, the NLRC’s Fourth Division rendered its
Decision,14 the dispositive portion of which reads:

WHEREFORE, premises considered, the decision of the Executive Labor Arbiter dismissing the complaint for unfair
labor practice and illegal dismissal is AFFIRMED with MODIFICATIONS declaring the dismissal of all the
complainants in RAB Case No. 07-02-0394-98 and RAB Case No. 07-03-0596-98 valid and legal. Necessarily, the
award of separation pay and attorney’s fees are hereby Deleted.

Resolution on RAB Case No. 07-02-0309-98 is hereby Deferred upon Joint Motion of the parties.

SO ORDERED.15

In its Resolution dated July 2, 2001, the NLRC denied complainants’ motion for reconsideration.16

Complainants elevated the case to the Court of Appeals (CA) (Cebu Station) via a petition for certiorari, docketed as
CA-G.R. SP No. 66540.17

In its Resolution dated November 14, 2001, the CA’s Eighth Division dismissed the petition on the ground that out of
88 petitioners only 47 have signed the certification against forum shopping.18 Petitioners moved to reconsider the
said dismissal arguing that the 47 signatories more than constitute the principal parties as the petition involves a
matter of common concern to all the petitioning employees.19 By Resolution20 dated May 28, 2002, the CA reinstated
the case only insofar as the 47 petitioners who signed the petition are concerned.

Petitioners challenged the validity of the November 14, 2001 and May 28, 2002 resolutions before this Court in a
petition for review on certiorari, docketed as G.R. No. 154113.

Meanwhile, the NLRC’s Fourth Division (Cebu City) rendered its Decision21 dated March 12, 2003 in RAB Case Nos.
07-02-0309-98 (NLRC Case No. V-001042-99) pertaining to complainants Erma Yballe, Evelyn Ong, Nelia Angel
and Eleuteria Cortez as follows:

WHEREFORE, premises considered, the decision of the Executive Labor Arbiter dismissing the complaint for unfair
labor practice and illegal dismissal is AFFIRMED with MODIFICATIONS declaring all complainants to have been
validly dismissed. Necessarily, the award of separation pay and attorney’s fees are hereby Deleted.

SO ORDERED.22

The NLRC likewise denied the motion for reconsideration filed by complainants Yballe, et al. in its Resolution dated
April 13, 2004.23

On October 17, 2008, the CA rendered its Decision24 in CA-G.R. SP No. 66540, the dispositive portion of which
states:

WHEREFORE, premises considered, judgment is hereby rendered AFFIRMING the Decision of the National Labor
Relations Commission (NLRC) – Fourth Division dated March 14, 2001 in NLRC Case No. V-001042-99, WITH
MODIFICATIONS to the effect that (1) the petitioners, except the union officers, shall be awarded separation pay
equivalent to one-half (1/2) month pay for every year of service, and (2) petitioner Cecilia Sabas shall be awarded
overtime pay amounting to sixty-three (63) hours.
Labor II – 1
SO ORDERED.25

Petitioners filed a motion for reconsideration while private respondents filed a motion for partial reconsideration
questioning the award of separation pay. The former also invoked the decision of this Court in Bascon v. Court of
Appeals,26 while the latter argued for the application of the ruling in decision rendered by the CA (Cebu City) in
Miculob v. NLRC, et al. (CA-G.R. SP No. 84538),27 both involving similar complaints filed by dismissed employees of
MCCHI.

By Resolution28 dated April 17, 2009, the CA denied both motions:

WHEREFORE, the petitioners’ Motion for Reconsideration and the private respondent[s’] Motion for Partial
Reconsideration of the October 17, 2008 Decision are both DENIED for lack of merit.

The Motions for Substitution of Counsel and Compromise Agreements submitted by petitioners Bernardito Lawas,
Avelina Bangalao, Dailenda Hinampas and Daylinda Tigo are hereby approved. Consequently, said petitioners are
ordered dropped from the list of petitioners and the case is deemed dismissed as to them.

SO ORDERED.29

Complainants Yballe, et al. also challenged before the CA the March 12, 2003 Decision and April 13, 2004
Resolution of the NLRC in a petition for certiorari, docketed as CA-G.R. SP No. 84998 (Cebu City). By
Decision30 dated November 7, 2008, the CA granted their petition, as follows:

WHEREFORE, the challenged Decision of public respondent dated March 12, 2003 and its Resolution dated April
13, 2004 are hereby REVERSED AND SET ASIDE. Private respondent Metro Cebu Community Hospital is ordered
to reinstate petitioners Erma Yballe, Eleuteria Cortes, Nelia Angel and Evelyn Ong without loss of seniority rights
and other privileges; to pay them their full backwages inclusive of their allowances and other benefits computed
from the time of their dismissal up to the time of their actual reinstatement.

No pronouncement as to costs.

SO ORDERED.31

Private respondents (MCCHI, et al.) moved to reconsider the above decision but the CA denied their motion on
February 22, 2011.32

Both petitioners and private respondents in CA-G.R. SP No. 66540 appealed to this Court. Private respondent
MCCHI in CA-G.R. SP No. 84998, under its new name Visayas Community Medical Center (VCMC), filed a petition
for certiorari in this Court.

In G.R. No. 187778, petitioners Nava, et al. prayed that the CA decision be set aside and a new judgment be
entered by this Court (1) declaring private respondents guilty of unfair labor practice and union busting; (2) directing
private respondents to cease and desist from further committing unfair labor practices against the petitioners; (3)
imposing upon MCCH the proposed CBA or, in the alternative, directing the hospital and its officers to bargain with
the local union; (4) declaring private respondents guilty of unlawfully suspending and illegally dismissing the
individual petitioners-employees; (5) directing private respondents to reinstate petitioners-employees to their former
positions, or their equivalent, without loss of seniority rights with full backwages and benefits until reinstatement; and
(6) ordering private respondents to pay the petitioners moral damages, exemplary damages, legal interests, and
attorney’s fees.33

On the other hand, petitioner MCCHI in G.R. No. 187861 prayed for the modification of the CA decision by deleting
the award of separation pay and reinstating the March 14, 2001 decision of the NLRC.34

In G.R. No. 196156, MCCHI/VCMC prayed for the annulment of the November 7, 2008 Decision and February 22,
2011 Resolution of the CA, for this Court to declare the dismissal of respondents Yballe, et al. as valid and legal and
to reinstate the March 12, 2003 Decision and April 13, 2004 Resolution of the NLRC.
Labor II – 1
G.R. No. 187861 was consolidated with G.R. Nos. 154113 and 187778 as they involve similar factual circumstances
and identical or related issues. G.R. No. 196156 was later also consolidated with the aforesaid cases.

The issues are: (1) whether the CA erred in dismissing the petition for certiorari (CA-G.R. SP No. 66540) with
respect to the petitioners in G.R. No. 154113 for their failure to sign the certification against forum shopping; (2)
whether MCCHI is guilty of unfair labor practice; (3) whether petitioning employees were illegally dismissed; and (4)
if their termination was illegal, whether petitioning employees are entitled to separation pay, backwages, damages
and attorney’s fees.

Dropping of petitioners who did not sign the certification against forum shopping improper

The Court has laid down the rule in Altres v. Empleo35 as culled from "jurisprudential pronouncements", that the
certification against forum shopping must be signed by all the plaintiffs or petitioners in a case; otherwise, those who
did not sign will be dropped as parties to the case. Under reasonable or justifiable circumstances, however, as when
all the plaintiffs or petitioners share a common interest and invoke a common cause of action or defense, the
signature of only one of them in the certification against forum shopping substantially complies with the Rule.

In the case at bar, the signatures of 47 out of 88 petitioning employees in the certification against forum shopping
constitute substantial compliance with the rule. There is no question that they shared a common interest and
invoked a common cause of action when they filed suit before the Labor Arbiter and NLRC questioning the validity
of their termination and charging MCCHI with unfair labor practice. Thus, when they appealed their case to the CA,
they pursued the same as a collective body, raising only one argument in support of their cause of action, i.e., the
illegal dismissal allegedly committed by MCCHI when union members resorted to strike and mass actions due to
MCCHI’s refusal to bargain with officers of the local chapter. There is sufficient basis, therefore, for the 47
signatories to the petition, to speak for and in behalf of their co-petitioners and to file the Petition for Certiorari in the
appellate court.36 Clearly, the CA erred in dropping as parties-petitioners those who did not sign the certification
against forum shopping. lavvphil

However, instead of remanding the case to the CA for it to resolve the petition with respect to the herein petitioners
in G.R. No. 154113, and as prayed for, the Court shall consider them parties-petitioners in CA-G.R. SP No.
66540,which case has already been decided and now subject of appeal in G.R. No. 187778.

MCCHI not guilty of unfair labor practice

Art. 248 (g) of the Labor Code, as amended, makes it an unfair labor practice for an employer "[t]o violate the duty
to bargain collectively" as prescribed by the Code. The applicable provision in this case is Art. 253 which provides:

ART. 253. Duty to bargain collectively when there exists a collective bargaining agreement. – When there is a
collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate
nor modify such agreement during its lifetime. However, either party can serve a written notice to terminate or
modify the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the
60-day period and/or until a new agreement is reached by the parties.

NAMA-MCCH-NFL charged MCCHI with refusal to bargain collectively when the latter refused to meet and convene
for purposes of collective bargaining, or at least give a counter-proposal to the proposed CBA the union had
submitted and which was ratified by a majority of the union membership. MCCHI, on its part, deferred any
negotiations until the local union’s dispute with the national union federation (NFL) is resolved considering that the
latter is the exclusive bargaining agent which represented the rank-and-file hospital employees in CBA negotiations
since 1987.

We rule for MCCHI.

Records of the NCMB and DOLE Region 7 confirmed that NAMA-MCCH-NFL had not registered as a labor
organization, having submitted only its charter certificate as an affiliate or local chapter of NFL.37 Not being a

Labor II – 1
legitimate labor organization, NAMA-MCCH-NFL is not entitled to those rights granted to a legitimate labor
organization under Art. 242, specifically:

(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;

xxxx

Aside from the registration requirement, it is only the labor organization designated or selected by the majority of the
employees in an appropriate collective bargaining unit which is the exclusive representative of the employees in
such unit for the purpose of collective bargaining, as provided in Art. 255.38 NAMA-MCCH-NFL is not the labor
organization certified or designated by the majority of the rank-and-file hospital employees to represent them in the
CBA negotiations but the NFL, as evidenced by CBAs concluded in 1987, 1991 and 1994. While it is true that a local
union has the right to disaffiliate from the national federation, NAMA-MCCH-NFL has not done so as there was no
any effort on its part to comply with the legal requisites for a valid disaffiliation during the "freedom period"39 or the
last 60 days of the last year of the CBA, through a majority vote in a secret balloting in accordance with Art. 241
(d).40 Nava and her group simply demanded that MCCHI directly negotiate with the local union which has not even
registered as one.

To prove majority support of the employees, NAMA-MCCH-NFL presented the CBA proposal allegedly signed by
153 union members. However, the petition signed by said members showed that the signatories endorsed the
proposed terms and conditions without stating that they were likewise voting for or designating the NAMA-MCCH-
NFL as their exclusive bargaining representative. In any case, NAMA-MCCH-NFL at the time of submission of said
proposals was not a duly registered labor organization, hence it cannot legally represent MCCHI’s rank-and-file
employees for purposes of collective bargaining. Hence, even assuming that NAMA-MCCH-NFL had validly
disaffiliated from its mother union, NFL, it still did not possess the legal personality to enter into CBA negotiations. A
local union which is not independently registered cannot, upon disaffiliation from the federation, exercise the rights
and privileges granted by law to legitimate labor organizations; thus, it cannot file a petition for certification
election.41 Besides, the NFL as the mother union has the right to investigate members of its local chapter under the
federation’s Constitution and By-Laws, and if found guilty to expel such members.42 MCCHI therefore cannot be
faulted for deferring action on the CBA proposal submitted by NAMA-MCCH-NFL in view of the union leadership’s
conflict with the national federation. We have held that the issue of disaffiliation is an intra-union dispute43 which
must be resolved in a different forum in an action at the instance of either or both the federation and the local union
or a rival labor organization, not the employer.44

Not being a legitimate labor organization nor the certified exclusive bargaining representative of MCCHI’s rank-and-
file employees, NAMA-MCCH-NFL cannot demand from MCCHI the right to bargain collectively in their
behalf.45 Hence, MCCHI’s refusal to bargain then with NAMA-MCCH-NFL cannot be considered an unfair labor
practice to justify the staging of the strike.46

Strike and picketing activities conducted by union officers and members were illegal

Art. 263 (b) of the Labor Code, as amended, provides:

ART. 263. Strikes, picketing and lockouts. – x x x

(b) 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.

x x x x (Emphasis supplied.)

Labor II – 1
As borne by the records, NAMA-MCCH-NFL was not a duly registered or an independently registered union at the
time it filed the notice of strike on March 13, 1996 and when it conducted the strike vote on April 2, 1996. It could not
then legally represent the union members. Consequently, the mandatory notice of strike and the conduct of the
strike vote report were ineffective for having been filed and conducted by NAMA-MCCH-NFL which has no legal
personality as a legitimate labor organization, in violation of Art. 263 (c), (d) and (f) of the Labor Code and Rule XXII,
Book V of the Omnibus Rules Implementing the Labor Code.47

Art. 263 of the Labor Code provides:

ART. 263. Strikes, picketing and lockouts. — (a) x x x

xxxx

(c) 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 30 days before the intended date thereof. In
cases of unfair labor practice, the period of notice shall be 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. However, 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. (As amended by Executive
Order No. 111, December 24, 1986.)

(d) The notice must be in accordance with such implementing rules and regulations as the Department of Labor and
Employment may promulgate.

xxxx

(f) 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. 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 Ministry the voting at least seven days
before the intended strike or lockout, subject to the cooling-off period herein provided. (As amended by Batas
Pambansa Bilang 130, August 21, 1981 and further amended by Executive Order No. 111, December 24, 1986.)
(Emphasis supplied.)

Rule XXII, Book V of the Omnibus Rules Implementing the Labor Code reads:

RULE XXII
CONCILIATION, STRIKES AND LOCKOUTS

xxxx

SEC. 6. Who may declare a strike or lockout. — Any certified or duly recognized bargaining representative may
declare a strike in cases of bargaining deadlocks and unfair labor practices. The employer may declare a lockout in
the same cases. In the absence of a certified or duly recognized bargaining representative, any legitimate labor
organization in the establishment may declare a strike but only on grounds of unfair labor practice. (Emphasis
supplied.)

Furthermore, the strike was illegal due to the commission of the following prohibited activities48 : (1) violence,
coercion, intimidation and harassment against non-participating employees; and (2) blocking of free ingress to and
egress from the hospital, including preventing patients and their vehicles from entering the hospital and other
employees from reporting to work, the putting up of placards with a statement advising incoming patients to proceed
to another hospital because MCCHI employees are on strike/protest. As shown by photographs49 submitted by
Labor II – 1
MCCHI, as well as the findings of the NCMB and Cebu City Government, the hospital premises and sidewalk within
its vicinity were full of placards, streamers and makeshift structures that obstructed its use by the public who were
likewise barraged by the noise coming from strikers using megaphones.50 On the other hand, the
affidavits51 executed by several hospital employees and patients narrated in detail the incidents of harassment,
intimidation, violence and coercion, some of these witnesses have positively identified the perpetrators. The
prolonged work stoppage and picketing activities of the striking employees severely disrupted hospital operations
that MCCHI suffered heavy financial losses.

The findings of the Executive Labor Arbiter and NLRC, as sustained by the appellate court, clearly established that
the striking union members created so much noise, disturbance and obstruction that the local government
authorities eventually ordered their removal for being a public nuisance. This was followed by an injunction from the
NCMB enjoining the union leaders from further blocking the free ingress to and egress from the hospital, and from
committing threats, coercion and intimidation against non-striking employees and patients/vehicles desiring to enter
for the purpose of seeking medical treatment/confinement. By then, the illegal strike had lasted for almost five
months.

Consequences of illegal strike to union officers and members

Art. 264 (a) of the Labor Code, as amended, provides for the consequences of an illegal strike to the participating
workers:

x x x 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.

The above provision makes a distinction between workers and union officers who participate in an illegal strike: an
ordinary striking worker cannot be terminated for mere participation in an illegal strike. There must be proof that he
or she 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.52

Considering their persistence in holding picketing activities despite the declaration by the NCMB that their union was
not duly registered as a legitimate labor organization and the letter from NFL’s legal counsel informing that their acts
constitute disloyalty to the national federation, and their filing of the notice of strike and conducting a strike vote
notwithstanding that their union has no legal personality to negotiate with MCCHI for collective bargaining purposes,
there is no question that NAMA-MCCH-NFL officers knowingly participated in the illegal strike. The CA therefore did
not err in ruling that the termination of union officers Perla Nava, Catalina Alsado, Albina Bañez, Hannah
Bongcaras, Ernesto Canen, Jesusa Gerona and Guillerma Remocaldo was valid and justified.

With respect to the dismissed union members, although MCCHI submitted photographs taken at the picket line, it
did not individually name those striking employees and specify the illegal act committed by each of them. As to the
affidavits executed by non-striking employees, they identified mostly union officers as the persons who blocked the
hospital entrance, harassed hospital employees and patients whose vehicles were prevented from entering the
premises. Only some of these witnesses actually named a few union members who committed similar acts of
harassment and coercion. Consequently, we find no error committed by the CA in CA-G.R. SP No. 66540 when it
modified the decision of the NLRC and ruled that the dismissal of union members who merely participated in the
illegal strike was illegal. On the other hand, in CA-G.R. SP No. 84998, the CA did not err in ruling that the dismissal
of Yballe, et al. was illegal; however, it also ordered their reinstatement with full back wages.

Dismissed union members not entitled to backwages but should be awarded separation pay in lieu of reinstatement

Since there is no clear proof that union members actually participated in the commission of illegal acts during the
strike, they are not deemed to have lost their employment status as a consequence of a declaration of illegality of
the strike.

Labor II – 1
Petitioners in G.R. Nos. 154113 and 187778 assail the CA in not ordering their reinstatement with back wages.
Invoking stare decisis, they cited the case of Bascon v. Court of Appeals53 decided by this Court in 2004 and which
involved two former hospital employees who likewise sued MCCHI after the latter terminated their employment due
to their participation in the same illegal strike led by NAMA-MCCH-NFL. In said case we ruled that petitioners Cole
and Bascon were illegally dismissed because MCCHI failed to prove that they committed illegal acts during the
strike. We thus ordered the reinstatement of petitioners Bascon and Cole without loss of seniority rights and other
privileges and payment of their back wages inclusive of allowances, and other benefits computed from the time they
were dismissed up to the time of their actual reinstatement. Bascon was also the basis of the award of back wages
in CA-G.R. SP No. 84998.

Stare decisis et non quieta movere. Stand by the decision and disturb not what is settled. Under the doctrine of stare
decisis, once a court has laid down a principle of law as applicable to a certain state of facts, it will adhere to that
principle and apply it to all future cases where the facts are substantially the same,54 even though the parties may be
different. It proceeds from the first principle of justice that, absent any powerful countervailing considerations, like
cases ought to be decided alike. Thus, where the same questions relating to the same event have been put forward
by parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare
decisis is a bar to any attempt to relitigate the same issue.55

The doctrine though is not cast in stone for upon a showing that circumstances attendant in a particular case
override the great benefits derived by our judicial system from the doctrine of stare decisis, the Court is justified in
setting it aside.56 For the Court, as the highest court of the land, may be guided but is not controlled by precedent.
Thus, the Court, especially with a new membership, is not obliged to follow blindly a particular decision that it
determines, after re-examination, to call for a rectification.57

Although the Bascon case involved the very same illegal strike in MCCHI which led to the termination of herein
petitioners, its clearly erroneous application of the law insofar only as the award of back wages warrants setting
aside the doctrine. Indeed, the doctrine of stare decisis notwithstanding, the Court has abandoned or overruled
precedents whenever it realized that the Court erred in the prior decisions. "Afterall, more important than anything
else is that this Court should be right."58

In G & S Transport Corporation v. Infante,59 the Court explained the rationale for its recent rulings deleting back
wages awarded to the dismissed workers if the strike was found to be illegal. Considering that they did not render
work for the employer during the strike, they are entitled only to reinstatement.

With respect to backwages, the principle of a "fair day’s wage for a fair day’s labor" remains as the basic factor in
determining the award thereof. If there is no work performed by the employee there can be no wage or pay unless,
of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed or
otherwise illegally prevented from working. While it was found that respondents expressed their intention to report
back to work, the latter exception cannot apply in this case. In Philippine Marine Officers’ Guild v. Compañia
Maritima, as affirmed in Philippine Diamond Hotel and Resort v. Manila Diamond Hotel Employees Union, the Court
stressed that for this exception to apply, it is required that the strike be legal, a situation that does not obtain in the
case at bar.

Under the circumstances, respondents’ reinstatement without backwages suffices for the appropriate relief. If
reinstatement is no longer possible, given the lapse of considerable time from the occurrence of the strike, the
award of separation pay of one (1) month salary for each year of service, in lieu of reinstatement, is in
order.60 (Emphasis supplied.)

The CA decision in CA-G.R. SP No. 66540 ordering the payment of separation pay in lieu of reinstatement without
back wages is thus in order, to conform to the policy of a fair day’s wage for a fair day’s labor. The amount of
separation pay is increased to one month pay for every year of service, consistent with jurisprudence. Accordingly,
the decision in CA-G.R. SP No. 84998 is modified by deleting the award of back wages and granting separation pay
in lieu of reinstatement.

It is to be noted that as early as April 8, 1996, union members who took part in the concerted activities have been
warned by management that NAMA-MCCH-NFL is not a legitimate labor organization and its notice of strike was
denied by the NCMB, and directed to desist from further participating in such illegal activities. Despite such warning,
Labor II – 1
they continued with their picketing activities and held more mass actions after management sent them termination
notices. The prolonged work stoppage seriously disrupted hospital operations, which could have eventually brought
MCCHI into bankruptcy had the City Government of Cebu not issued a demolition order and the NLRC Region 7 not
formally enjoined the prohibited picketing activities. Also, the illegal dismissal complaints subsequently filed by the
terminated employees did not obliterate the fact that they did not suffer loss of earnings by reason of the employer’s
unjustified acts, there being no unfair labor practice committed by MCCHI. Hence, fairness and justice dictate that
back wages be denied the said employees who participated in the illegal concerted activities to the great detriment
of the employer.

Separation pay is made an alternative relief in lieu of reinstatement in certain circumstances, like: (a) when
reinstatement can no longer be effected in view of the passage of a long period of time or because of the realities of
the situation; (b) reinstatement is inimical to the employer’s interest; (c) reinstatement is no longer feasible; (d)
reinstatement does not serve the best interests of the parties involved; (e) the employer is prejudiced by the
workers’ continued employment; (f) facts that make execution unjust or inequitable have supervened; or (g) strained
relations between the employer and employee.61

Considering that 15 years had lapsed from the onset of this labor dispute, and in view of strained relations that
ensued, in addition to the reality of replacements already hired by the hospital which had apparently recovered from
its huge losses, and with many of the petitioners either employed elsewhere, already old and sickly, or otherwise
incapacitated, separation pay without back wages is the appropriate relief. We note that during the pendency of the
cases in this Court, some of the petitioners have entered into compromise agreements with MCCHI, all of which
were duly approved by this Court. Thus, excluded from the herein monetary awards are the following petitioners
whose compromise agreements have been approved by this Court and judgment having been entered therein:
Gloria Arguilles, Romulo Alforque, Gerna Patigdas-Barte, Daylinda Tigo Merlyn Nodado, Ramon Tagnipis, Bernabe
Lumapguid, Romeo Empuerto, Marylen Labra, Milagros Castillo Bernadette Pontillas-Tibay, Constancio Pagador,
Nolan Alvin Panal, Edilberto Villa, Roy Malazarte, Felecianita Malazarte and Noel Hortelano.

Attorney’s fees

The dismissed employees having been compelled to litigate in order to seek redress and protect their rights, they
are entitled to reasonable attorney’s fees pursuant to Art. 2208 (2) of the Civil Code. In view of the attendant
circumstances of this case, we hold that attorney’s fees in the amount of ₱50,000.00 is reasonable and justified.
However, the respondents in G.R. No. 196156 are not entitled to the same relief since they did not appeal from the
CA decision which did not include the award of attorney’s fees.

WHEREFORE, the petition for review on certiorari in G.R. No. 187861 is DENIED while the petitions in G.R. Nos.
154113, 187778 and 196156 are PARTLY GRANTED. The Decision dated October 17, 2008 of the Court of
Appeals in CA-G.R. SP No. 66540 is hereby AFFIRMED with MODIFICATIONS in that MCCHI is ordered to pay the
petitioners in G.R. Nos. 154113 and 187778, except the petitioners who are union officers, separation pay
equivalent to one month pay for every year of service, and reasonable attorney’s fees in the amount of ₱50,000.00.
The Decision dated November 7, 2008 is likewise AFFIRMED with MODIFICATIONS in that MCCHI is ordered to
pay the private respondents in G.R. No. 196156 separation pay equivalent to one month pay for every year of
service, and that the award of back wages is DELETED.

The case is hereby remanded to the Executive Labor Arbiter for the recomputation of separation pay due to each of
the petitioners union members in G.R. Nos. 154113, 187778 and 196156 except those who have executed
compromise agreements approved by this Court.

Labor II – 1
 62.) [G.R. No. 170830 : August 11, 2010]

PHIMCO INDUSTRIES, INC., PETITIONER, VS. PHIMCO INDUSTRIES LABOR ASSOCIATION

(PILA), AND ERLINDA VAZQUEZ, RICARDO Â· SACRISTAN, LEONIDA CATALAN, MAXIMO
PEDRO, NATHANIELA DIMACULANGAN,* RODOLFO MOJICO, ROMEO CARAMANZA,
REYNALDO GANITANO, ALBERTO BASCONCILLO,** AND RAMON FALCIS, IN THEIR
CAPACITY AS OFFICERS OF PILA, AND ANGELITA BALOSA,*** DANILO BANAAG, ABRAHAM
CADAY, ALFONSO CLAUDIO, FRANCISCO DALISAY,**** ANGELITO DEJAN,***** PHILIP
GARCES, NICANOR ILAGAN, FLORENCIO LIBONGCOGON, ****** NEMESIO MAMONONG,
TEOFILO MANALILI, ALFREDO PEARSON,******* MARIO PEREA,******** RENATO RAMOS,
MARIANO ROSALES, PABLO SARMIENTO, RODOLFO TOLENTINO, FELIPE VILLAREAL,
ARSENIO ZAMORA, DANILO BALTAZAR, ROGER CABER,********* REYNALDO CAMARIN,
BERNARDO CUADRA,********** ANGELITO DE GUZMAN, GERARDO FELICIANO,*********** ALEX
IBAÑEZ, BENJAMIN JUAN, SR., RAMON MACAALAY, GONZALO MANALILI, RAUL MICIANO,
HILARIO PEÑA, TERESA PERMOCILLO,************ ERNESTO RIO, RODOLFO SANIDAD, RAFAEL
STA. ANA, JULIAN TUGUIN AND AMELIA ZAMORA, AS MEMBERS OF PILA, RESPONDENTS.

DECISION

BRION, J.:

Before us is the petition for review on certiorari[1] filed by petitioner Phimco Industries, Inc.
(PHIMCO), seeking to reverse and set aside the decision,[2] dated February 10, 2004, and the
resolution,[3] dated December 12, 2005, of the Court of Appeals (CA) in CA-G.R. SP No. 70336. The
assailed CA decision dismissed PHIMCO's petition for certiorari that challenged the resolution, dated
December 29, 1998, and the decision, dated February 20, 2002, of the National Labor Relations
Commission (NLRC); the assailed CA resolution denied PHIMCO's subsequent motion for
reconsideration.

FACTUAL BACKGROUND

The facts of the case, gathered from the records, are briefly summarized below.

PHIMCO is a corporation engaged in the production of matches, with principal address at Phimco
Compound, Felix Manalo St., Sta. Ana, Manila. Respondent Phimco Industries Labor Association
(PILA) is the duly authorized bargaining representative of PHIMCO's daily-paid workers. The 47
individually named respondents are PILA officers and members.

When the last collective bargaining agreement was about to expire on December 31, 1994, PHIMCO
and PILA negotiated for its renewal. The negotiation resulted in a deadlock on economic issues,
mainly due to disagreements on salary increases and benefits.

On March 9, 1995, PILA filed with the National Conciliation and Mediation Board (NCMB) a Notice of
Strike on the ground of the bargaining deadlock. Seven (7) days later, or on March 16, 1995, the
union conducted a strike vote; a majority of the union members voted for a strike as its response to
the bargaining impasse. On March 17, 1995, PILA filed the strike vote results with the NCMB. Thirty-
five (35) days later, or on April 21, 1995, PILA staged a strike.

On May 3, 1995, PHIMCO filed with the NLRC a petition for preliminary injunction and temporary
restraining order (TRO), to enjoin the strikers from preventing - through force, intimidation and
coercion - the ingress and egress of non-striking employees into and from the company premises. On
May 15, 1995, the NLRC issued an ex-parte TRO, effective for a period of twenty (20) days, or until
June 5, 1995.

On June 23, 1995, PHIMCO sent a letter to thirty-six (36) union members, directing them to explain
Labor II – 1
within twenty-four (24) hours why they should not be dismissed for the illegal acts they committed
during the strike. Three days later, or on June 26, 1995, the thirty-six (36) union members were
informed of their dismissal.

On July 6, 1995, PILA filed a complaint for unfair labor practice and illegal dismissal (illegal dismissal
case) with the NLRC. The case was docketed as NLRC NCR Case No. 00-07-04705-95, and raffled to
Labor Arbiter (LA) Pablo C. Espiritu, Jr.

On July 7, 1995, then Acting Labor Secretary Jose S. Brillantes assumed jurisdiction over the labor
dispute, and ordered all the striking employees (except those who were handed termination papers
on June 26, 1995) to return to work within twenty-four (24) hours from receipt of the order. The
Secretary ordered PHIMCO to accept the striking employees, under the same terms and conditions
prevailing prior to the strike.[4] On the same day, PILA ended its strike.

On August 28, 1995, PHIMCO filed a Petition to Declare the Strike Illegal (illegal strike case) with the
NLRC, with a prayer for the dismissal of PILA officers and members who knowingly participated in the
illegal strike. PHIMCO claimed that the strikers prevented ingress to and egress from the PHIMCO
compound, thereby paralyzing PHIMCO's operations. The case was docketed as NLRC NCR Case No.
00-08-06031-95, and raffled to LA Jovencio Ll. Mayor.

On March 14, 1996, the respondents filed their Position Paper in the illegal strike case. They
countered that they complied with all the legal requirements for the staging of the strike, they put up
no barricade, and conducted their strike peacefully, in an orderly and lawful manner, without
incident.

LA Mayor decided the case on February 4, 1998,[5] and found the strike illegal; the respondents
committed prohibited acts during the strike by blocking the ingress to and egress from PHIMCO's
premises and preventing the non-striking employees from reporting for work. He observed that it
was not enough that the picket of the strikers was a moving picket, since the strikers should allow
the free passage to the entrance and exit points of the company premises. Thus, LA Mayor declared
that the respondent employees, PILA officers and members, have lost their employment status.

On March 5, 1998, PILA and its officers and members appealed LA Mayor's decision to the NLRC.

THE NLRC RULING

The NLRC decided the appeal on December 29, 1998, and set aside LA Mayor's decision.[6] The NLRC
did not give weight to PHIMCO's evidence, and relied instead on the respondents' evidence showing
that the union conducted a peaceful moving picket.

On January 28, 1999, PHIMCO filed a motion for reconsideration in the illegal strike case.[7]

In a parallel development, LA Espiritu decided the union's illegal dismissal case on March 2, 1999. 
He ruled the respondents' dismissal as illegal, and ordered their reinstatement with payment of
backwages. PHIMCO appealed LA Espiritu's decision to the NLRC.

Pending the resolution of PHIMCO's motion for reconsideration in the illegal strike case and the
appeal of the illegal dismissal case, PHIMCO moved for the consolidation of the two (2) cases. The
NLRC acted favorably on the motion and consolidated the two (2) cases in its Order dated August 5,
1999.

On February 20, 2002, the NLRC rendered its Decision in the consolidated cases, ruling totally in the
union's favor.[8] It dismissed the appeal of the illegal dismissal case, and denied PHIMCO's motion for
reconsideration in the illegal strike case. The NLRC found that the picket conducted by the striking
employees was not an illegal blockade and did not obstruct the points of entry to and exit from the
Labor II – 1
company's premises; the pictures submitted by the respondents revealed that the picket was
moving, not stationary. With respect to the illegal dismissal charge, the NLRC observed that the
striking employees were not given ample opportunity to explain their side after receipt of the June
23, 1995 letter. Thus, the NLRC affirmed the Decision of LA Espiritu with respect to the payment of
backwages until the promulgation of the decision, plus separation pay at one (1) month salary per
year of service in lieu of reinstatement, and 10% of the monetary award as attorney's fees. It ruled
out reinstatement because of the damages sustained by the company brought about by the strike.

On March 14, 2002, PHIMCO filed a motion for reconsideration of the consolidated decision.

On April 26, 2002, without waiting for the result of its motion for reconsideration, PHIMCO elevated
its case to the CA through a petition for certiorari under Rule 65 of the Rules of Court.[9]

THE CA RULING

In a Decision[10] promulgated on February 10, 2004, the CA dismissed PHIMCO's petition

for certiorari.  The CA noted that the NLRC findings, that the picket was peaceful and that PHIMCO's
evidence failed to show that the picket constituted an illegal blockade or that it obstructed the points
of entry to and exit from the company premises, were supported by substantial evidence.

PHIMCO came to us through the present petition after the CA denied[11] PHIMCO's motion for
reconsideration.[12]

THE PETITION

The petitioner argues that the strike was illegal because the respondents committed the prohibited
acts under Article 264(e) of the Labor Code, such as blocking the ingress and egress of the company
premises, threat, coercion, and intimidation, as established by the evidence on record.

THE CASE FOR THE RESPONDENTS

The respondents, on the other hand, submit that the issues raised in this case are factual in nature
that we cannot generally touch in a petition for review, unless compelling reasons exist; the company
has not shown any such compelling reason as the picket was peaceful and uneventful, and no human
barricade blocked the company premises.

THE ISSUE

In Montoya v. Transmed Manila Corporation,[13] we laid down the basic approach that should be
followed in the review of CA decisions in labor cases, thus:

In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the
review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the
review of questions of law raised against the assailed CA decision. In ruling for legal correctness, we
have to view the CA decision in the same context that the petition for certiorari it ruled upon was
presented to it; we have to examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not
on the basis of whether the NLRC decision on the merits of the case was correct. In other words, we
have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it. This is the approach that should be basic in a Rule 45 review of a
CA ruling in a labor case. In question form, the question to ask is: Did the CA correctly determine
whether the NLRC committed grave abuse of discretion in ruling on the case?

In this light, the core issue in the present case is whether the CA correctly ruled that the NLRC did
not act with grave abuse of discretion in ruling that the union's strike was legal.

Labor II – 1
 OUR RULING

We find the petition partly meritorious.

Requisites of a valid strike

A strike is the most powerful weapon of workers in their struggle with management in the course of
setting their terms and conditions of employment.  Because it is premised on the concept of
economic war between labor and management, it is a weapon that can either breathe life to or
destroy the union and its members, and one that must also necessarily affect management and its
members.[14]

In light of these effects, the decision to declare a strike must be exercised responsibly and must
always rest on rational basis, free from emotionalism, and unswayed by the tempers and tantrums of
hot heads; it must focus on legitimate union interests. To be legitimate, a strike should not be
antithetical to public welfare, and must be pursued within legal bounds. The right to strike as a
means of attaining social justice is never meant to oppress or destroy anyone, least of all, the
employer.[15]

Since strikes affect not only the relationship between labor and management but also the general
peace and progress of the community, the law has provided limitations on the right to strike.
Procedurally, for a strike to be valid, it must comply with Article 263[16] of the Labor Code, which
requires that: (a) a notice of strike be filed with the Department of Labor and Employment (DOLE) 30
days before the intended date thereof, or 15 days in case of unfair labor practice; (b) a strike vote be
approved by a majority of the total union membership in the bargaining unit concerned, obtained by
secret ballot in a meeting called for that purpose; and (c) a notice be given to the DOLE of the results
of the voting at least seven days before the intended strike.

These requirements are mandatory, and the union's failure to comply renders the strike illegal.[17] 
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.[18]

In the present case, the respondents fully satisfied the legal procedural requirements; a strike notice
was filed on March 9, 1995; a strike vote was reached on March 16, 1995; notification of the strike
vote was filed with the DOLE on March 17, 1995; and the actual strike was launched only on April 25,
1995.

Strike may be illegal for commission of prohibited acts

Despite the validity of the purpose of a strike and compliance with the procedural requirements, a
strike may still be held illegal where the means employed are illegal.[19] The means become illegal
when they come within the prohibitions under Article 264(e) of the Labor Code which provides:

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.

Based on our examination of the evidence which the LA viewed differently from the NLRC
and the CA, we find the PILA strike illegal.  We intervene and rule even on the evidentiary and
factual issues of this case as both the NLRC and the CA grossly misread the evidence, leading them
to inordinately incorrect conclusions, both factual and legal. While the strike undisputably had not
been marred by actual violence and patent intimidation, the picketing that respondent PILA officers
and members undertook as part of their strike activities effectively blocked the free ingress to and
egress from PHIMCO's premises, thus preventing non-striking employees and company vehicles from
Labor II – 1
entering the PHIMCO compound.  In this manner, the picketers violated Article 264(e) of the Labor
Code.

The Evidence

We gather from the case record the following pieces of relevant evidence adduced in the compulsory
arbitration proceedings.[20]

For the Company

1. Pictures taken during the strike, showing that the respondents prevented free ingress to and
egress from the company premises;[21]

2. Affidavit of PHIMCO Human Resources Manager Francis Ferdinand Cinco, stating that he was one
of the employees prevented by the strikers from entering the PHIMCO premises;[22]

3. Affidavit of Cinco, identifying Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo Pedro,
Nathaniela R. Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto
Basconcillo, and Ramon Falcis as PILA officers;[23]

4. Affidavit of Cinco identifying other members of PILA;[24]

5. Folder 1, containing pictures taken during the strike identifying and showing Leonida Catalan,
Renato Ramos, Arsenio Zamora, Reynaldo Ganitano, Amelia Zamora, Angelito Dejan, Teresa
Permocillo, and Francisco Dalisay as the persons preventing Cinco and his group from entering the
company premises;[25]

6. Folder 2, with pictures taken on May 30, 1995, showing Cinco, together with non-striking PHIMCO
employees, reporting for work but being refused entry by strikers Teofilo Manalili, Nathaniela
Dimaculangan, Bernando Cuadra, Maximo Pedro, Nicanor Ilagan, Julian Tuguin, Nemesio Mamonong,
Abraham Caday, Ernesto Rio, Benjamin Juan, Sr., Ramon Macaalay, Gerardo Feliciano, Alberto
Basconcillo, Rodolfo Sanidad, Mariano Rosales, Roger Caber, Angelito de Guzman, Angelito Balosa
and Philip Garces who blocked the company gate;[26]

7. Folder 3, with pictures taken on May 30, 1995, showing the respondents denying free ingress to
and egress from the company premises;[27]

8. Folder 4, with pictures taken during the strike, showing that non-striking employees failed to enter
the company premises as a result of the respondents' refusal to let them in;[28]

9. Affidavit of Joaquin Aguilar stating that the pictures presented by Cinco were taken during the
strike;[29]

10. Pictures taken by Aguilar during the strike, showing non-striking employees being refused entry
by the respondents;[30]

11. Joint affidavit of Orlando Marfil and Rodolfo Digo, identifying the pictures they took during the
strike, showing that the respondents blocked ingress to and egress from the company premises;
[31]
 and,

12. Testimonies of PHIMCO employees Rodolfo Eva, Aguilar and Cinco, as well as those of PILA
officers Maximo Pedro and Leonida Catalan.

For the Respondents

Labor II – 1
1. Affidavit of Leonida Catalan, stating that the PILA strike complied with all the legal requirements,
and the strike/picket was conducted peacefully with no incident of any illegality;[32]

2. Affidavit of Maximo Pedro, stating that the strike/picket was conducted peacefully; the picket was
always moving with no acts of illegality having been committed during the strike;[33]

3. Certification of Police Station Commander Bienvenido de los Reyes that during the strike there was
no report of any untoward incident;[34]

4. Certification of Rev. Father Erick Adeviso of Dambanang Bayan Parish Church that the strike was
peaceful and without any untoward incident;[35]

5. Certification of Priest-In-Charge Angelito Fausto of the Philippine Independent Church in Punta,

Santa Ana, that the strike complied with all the requirements for a lawful strike, and the strikers
conducted themselves in a peaceful manner;[36]

6. Clearance issued by Punong Barangay Mario O. dela Rosa and Barangay Secretary Pascual

Gesmundo, Jr. that the strike from April 21 to July 7, 1995 was conducted in an orderly manner with
no complaints filed;[37] and,

7. Testimonies at the compulsory arbitration proceedings.

In its resolution of December 29, 1998,[38] the NLRC declared that "the string of proofs" the company
presented was "overwhelmingly counterbalanced by the numerous pieces of evidence adduced by
respondents  x  x x  all depicting a common story that respondents put up a peaceful moving picket,
and did not commit any illegal acts  x  x x  specifically obstructing the ingress to and egress from the
company premises[.]"[39]

We disagree with this finding as the purported "peaceful moving picket" upon which the NLRC
resolution was anchored was not an innocuous picket, contrary to what the NLRC said it was; the
picket, under the evidence presented, did effectively obstruct the entry and exit points of the
company premises on various occasions.

To strike is to withhold or to stop work by the concerted action of employees as a result of an

industrial or labor dispute.[40]  The work stoppage may be accompanied by picketing by the striking
employees outside of the company compound.  While a strike focuses on stoppage of work, picketing
focuses on publicizing the labor dispute and its incidents to inform the public of what is happening in
the company struck against.  A picket simply means to march to and from the employer's premises,
usually accompanied by the display of placards and other signs making known the facts involved in a
labor dispute.[41]  It is a strike activity separate and different from the actual stoppage of work.

While the right of employees to publicize their dispute falls within the protection of freedom of
expression[42] and the right to peaceably assemble to air grievances,[43] these rights are by no means
absolute. Protected picketing does not extend to blocking ingress to and egress from the company
premises.[44]  That the picket was moving, was peaceful and was not attended by actual violence may
not free it from taints of illegality if the picket effectively blocked entry to and exit from the company
premises.

In this regard, PHIMCO employees Rodolfo Eva and Joaquin Aguilar, and the company's Human
Resources Manager Francis Ferdinand Cinco testified during the compulsory arbitration hearings:

ATTY. REYES: this incident on May 22, 1995, when a coaster or bus attempted to enter PHIMCO
compound, you mentioned that it was refused entry. Why was this (sic) it refused entry?

WITNESS: Because at that time, there was a moving picket at the gate that is why the bus was not
Labor II – 1
able to enter.[45]

x  x  x x

Q: Despite this TRO, which was issued by the NLRC, were you allowed entry by the strikers?

A: We made several attempts to enter the compound, I remember on May 7, 1995, we tried to enter
the PHIMCO compound but we were not allowed entry.

Q: Aside from May 27, 1995, were there any other instances wherein you were not allowed entry at
PHIMCO compound?

A: On May 29, I recall I was riding with our Production Manager with the Pick-up. We tried to enter
but we were not allowed by the strikers.[46]

x  x  x  x

ARBITER MAYOR: How did the strikers block the ingress of the company?

A: They hold around, joining hands, moving picket.[47]

x  x  x  x

ARBITER MAYOR: Reform the question, and because of that moving picket conducted by the strikers,
no employees or vehicles can come in or go out of the premises?

A: None, sir.[48]

These accounts were confirmed by the admissions of respondent PILA officers Maximo Pedro and
Leonida Catalan that the strikers prevented non-striking employees from entering the company
premises. According to these union officers:

ATTY. CHUA: Mr. witness, do you recall an incident when a group of managers of PHIMCO, with
several of the monthly paid employees who tried to enter the PHIMCO compound during the strike?

MR. PEDRO: Yes, sir.

ATTY. CHUA: Can you tell us if these (sic) group of managers headed by Francis Cinco entered the
compound of PHIMCO on that day, when they tried to enter?

MR. PEDRO: No, sir. They were not able to enter.[49]

x  x x  x

ATTY. CHUA: Despite having been escorted by police Delos Reyes, you still did not give way, and
instead proceeded with your moving picket?

MR. PEDRO: Yes, sir.

ATTY. CHUA: In short, these people were not able to enter the premises of PHIMCO, Yes or No.

MR. PEDRO: Yes, sir.[50]

x  x x  x

Labor II – 1
ATTY. CHUA: Madam witness, even if Major Delos Reyes instructed you to give way so as to allow the
employees and managers to enter the premises, you and your co-employees did not give way?

MS. CATALAN: No sir.

ATTY. CHUA: the managers and the employees were not able to enter the premises?

MS. CATALAN: Yes, sir.[51]

The NLRC resolution itself noted the above testimonial evidence, "all building up a scenario that the
moving picket put up by [the] respondents obstructed the ingress to and egress from the company
premises[,]"[52] yet it ignored the clear import of the testimonies as to the true nature of the picket.
Contrary to the NLRC characterization that it was a "peaceful moving picket," it stood, in fact, as an
obstruction to the company's points of ingress and egress.

Significantly, the testimonies adduced were validated by the photographs taken of the strike area,
capturing the strike in its various stages and showing how the strikers actually conducted the picket. 
While the picket was moving, it was maintained so close to the company gates that it virtually
constituted an obstruction, especially when the strikers joined hands, as described by Aguilar, or
were moving in circles, hand-to-shoulder, as shown by the photographs, that, for all intents and
purposes, blocked the free ingress to and egress from the company premises. In fact, on closer
examination, it could be seen that the respondents were conducting the picket right at the company
gates.[53]

The obstructive nature of the picket was aggravated by the placement of benches, with strikers
standing on top, directly in front of the open wing of the company gates, clearly obstructing the
entry and exit points of the company compound.[54]

With a virtual human blockade and real physical obstructions (benches and makeshift structures both
outside and inside the gates),[55] it was pure conjecture on the part of the NLRC to say that "[t]he
non-strikers and their vehicles were  x  x  x  free to get in and out of the company compound
undisturbed by the picket line."[56]  Notably, aside from non-strikers who wished to report for work,
company vehicles likewise could not enter and get out of the factory because of the picket and the
physical obstructions the respondents installed. The blockade went to the point of causing the build
up of traffic in the immediate vicinity of the strike area, as shown by photographs.[57]  This, by itself,
renders the picket a prohibited activity. Pickets may not aggressively interfere with the right of
peaceful ingress to and egress from the employer's shop or obstruct public thoroughfares; picketing
is not peaceful where the sidewalk or entrance to a place of business is obstructed by picketers
parading around in a circle or lying on the sidewalk.[58]

What the records reveal belies the NLRC observation that "the evidence  x  x x  tends to show that
what respondents actually did was walking or patrolling to and fro within the company vicinity and by
word of mouth, banner or placard, informing the public concerning the dispute."[59]

The "peaceful moving picket" that the NLRC noted, influenced apparently by the certifications (Mayor
delos Reyes, Fr. Adeviso, Fr. Fausto and Barangay Secretary Gesmundo presented in evidence by the
respondents, was "peaceful" only because of the absence of violence during the strike, but the
obstruction of the entry and exit points of the company premises caused by the respondents' picket
was by no means a "petty blocking act" or an "insignificant obstructive act."[60]

As we have stated, while the picket was moving,  the movement was in circles, very close to the
gates, with the strikers in a hand-to-shoulder formation without a break in their ranks, thus
preventing non-striking workers and vehicles from coming in and getting out.  Supported by actual
blocking benches and obstructions, what the union demonstrated was a very persuasive and quietly
Labor II – 1
intimidating strategy whose chief aim was to paralyze the operations of the company, not solely by
the work stoppage of the participating workers, but by excluding the company officials and non-
striking employees from access to and exit from the company premises.  No doubt, the strike caused
the company operations considerable damage, as the NLRC itself recognized when it ruled out the
reinstatement of the dismissed strikers.[61]

Intimidation

Article 264(e) of the Labor Code tells us that picketing carried on with violence, coercion or
intimidation is unlawful.[62] According to American jurisprudence, what constitutes unlawful
intimidation depends on the totality of the circumstances.[63] Force threatened is the equivalent of
force exercised. There may be unlawful intimidation without direct threats or overt acts of violence.
Words or acts which are calculated and intended to cause an ordinary person to fear an injury to his
person, business or property are equivalent to threats.[64] 

The manner in which the respondent union officers and members conducted the picket in the present
case had created such an intimidating atmosphere that non-striking employees and even company
vehicles did not dare cross the picket line, even with police intervention.  Those who dared cross the
picket line were stopped.  The compulsory arbitration hearings bear this out.

Maximo Pedro, a PILA officer, testified, on July 30, 1997, that a group of PHIMCO managers led by
Cinco, together with several monthly-paid employees, tried to enter the company premises on May
27, 1995 with police escort; even then, the picketers did not allow them to enter.[65]Leonida Catalan,
another union officer, testified that she and the other picketers did not give way despite the
instruction of Police Major de los Reyes to the picketers to allow the group to enter the company
premises.[66]  (To be sure, police intervention and participation are, as a rule, prohibited acts in a
strike, but we note this intervention solely as indicators of how far the union and its members have
gone to block ingress to and egress from the company premises.)

Further, PHIMCO employee Rodolfo Eva testified that on May 22, 1995, a company coaster or bus
attempted to enter the PHIMCO compound but it was refused entry by the "moving picket."[67]  Cinco,
the company personnel manager, also testified that on May 27, 1995, when the NLRC TRO was in
force, he and other employees tried to enter the PHIMCO compound, but they were not allowed
entry; on May 29, 1995, Cinco was with the PHIMCO production manager in a pick-up and they tried
to enter the company compound but, again, they were not allowed by the strikers.[68] Another
employee, Joaquin Aguilar, when asked how the strikers blocked the ingress of the company, replied
that the strikers "hold around, joining hands, moving picket" and, because of the moving picket, no
employee or vehicle could come in and go out of the premises.[69]

The evidence adduced in the present case cannot be ignored. On balance, it supports the company's
submission that the respondent PILA officers and members committed acts during the strike
prohibited under Article 264(e) of the Labor Code.  The testimonies of non-striking employees, who
were prevented from gaining entry into the company premises, and confirmed no less by two officers
of the union, are on record.

The photographs of the strike scene, also on record, depict the true character of the picket; while
moving, it, in fact, constituted a human blockade, obstructing free ingress to and egress from the
company premises, reinforced by benches planted directly in front of the company gates.  The
photographs do not lie - these photographs clearly show that the picketers were going in circles,
without any break in their ranks or closely bunched together, right in front of the gates.  Thus,
company vehicles were unable to enter the company compound, and were backed up several meters
into the street leading to the company gates.

Despite all these clear pieces of evidence of illegal obstruction, the NLRC looked the other way and
chose not to see the unmistakable violations of the law on strikes by the union and its respondent
Labor II – 1
officers and members.  Needless to say, while the law protects the rights of the laborer, it authorizes
neither the oppression nor the destruction of the employer.[70]  For grossly ignoring the evidence
before it, the NLRC committed grave abuse of discretion; for supporting these gross NLRC errors, the
CA committed its own reversible error.

Liabilities of union

officers and members

In the determination of the liabilities of the individual respondents, the applicable provision is Article
264(a) of the Labor Code:

Art. 264. Prohibited activities. - (a)  x x  x

x  x  x  x

Any 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
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.

We explained in Samahang Manggagawa sa Sulpicio Lines, Inc.-NAFLU v. Sulpicio Lines, Inc. [71] that
the effects of illegal strikes, outlined in Article 264 of the Labor Code, make a distinction between
participating workers and union officers.  The services of an ordinary striking worker cannot be
terminated for mere participation in an illegal strike; proof must be adduced showing that he or she
committed illegal acts during the strike. The services of a participating union officer, on the other
hand, may be terminated, not only when he actually commits an illegal act during a strike, but also if
he knowingly participates in an illegal strike.[72]

In all cases, the striker must be identified. But proof beyond reasonable doubt is not required;
substantial evidence, available under the attendant circumstances, suffices to justify the imposition
of the penalty of dismissal on participating workers and union officers as above described.[73]

In the present case, respondents Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan, Maximo Pedro,
Nathaniela Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano, Alberto
Basconcillo, and Ramon Falcis stand to be dismissed as  participating union officers, pursuant to
Article 264(a), paragraph 3, of the Labor Code.  This provision imposes the penalty of dismissal on
"any union officer who knowingly participates in an illegal strike." The law grants the employer the
option of declaring a union officer who participated in an illegal strike as having lost his employment.
[74]

PHIMCO was able to individually identify the participating union members thru the affidavits of
PHIMCO employees Martimer Panis[75] and Rodrigo A. Ortiz,[76] and Personnel Manager Francis
Ferdinand Cinco,[77] and the photographs[78] of Joaquin Aguilar. Identified were respondents Angelita
Balosa, Danilo Banaag, Abraham Caday, Alfonso Claudio, Francisco Dalisay, Angelito Dejan, Philip
Garces, Nicanor Ilagan, Florencio Libongcogon, Nemesio Mamonong, Teofilo Manalili, Alfredo Pearson,
Mario Perea, Renato Ramos, Mariano Rosales, Pablo Sarmiento, Rodolfo Tolentino, Felipe Villareal,
Arsenio Zamora, Danilo Baltazar, Roger Caber,  Reynaldo Camarin, Bernardo Cuadra, Angelito de
Guzman, Gerardo Feliciano, Alex Ibañez, Benjamin Juan, Sr., Ramon Macaalay, Gonzalo Manalili,
Raul Miciano, Hilario Peña, Teresa Permocillo, Ernesto Rio, Rodolfo Sanidad, Rafael Sta. Ana, Julian
Tuguin and Amelia Zamora as the union members who actively participated in the strike by blocking
the ingress to and egress from the company premises and preventing the passage of non-striking
employees. For participating in illegally blocking ingress to and egress from company premises, these
Labor II – 1
union members stand to be dismissed for their illegal acts in the conduct of the union's strike.

PHIMCO failed to observe due process

We find, however, that PHIMCO violated the requirements of due process of the Labor Code when it
dismissed the respondents.

Under Article 277(b)[79] of the Labor Code, the employer must send the employee, who is about to be
terminated, a written notice stating the cause/s for termination and must give the employee the
opportunity to be heard and to defend himself.

We explained in Suico v. National Labor Relations Commission,[80]  that Article 277(b), in relation to
Article 264(a) and (e) of the Labor Code recognizes the right to due process of all workers, without
distinction as to the cause of their termination, even if the cause was their supposed involvement in
strike-related violence prohibited under Article 264(a) and (e) of the Labor Code.

To meet the requirements of due process in the dismissal of an employee, an employer must furnish
him or her with two (2) written notices: (1) a written notice specifying the grounds for termination
and giving the employee a reasonable opportunity to explain his side  and (2) another written notice
indicating that, upon due consideration of all circumstances, grounds have been established to justify
the employer's decision to dismiss the employee.[81]

In the present case, PHIMCO sent a letter, on June 23, 1995, to thirty-six (36) union members,
generally directing them to explain within twenty-four (24) hours why they should not be dismissed
for the illegal acts they committed during the strike; three days later, or on June 26, 1995, the
thirty-six (36) union members were informed of their dismissal from employment.

We do not find this company procedure to be sufficient compliance with the due process
requirements that the law guards zealously.  It does not appear from the evidence that the union
officers were specifically informed of the charges against them and given the chance to explain and
present their side. Without the specifications they had to respond to, they were arbitrarily separated
from work in total disregard of their rights to due process and security of tenure.

As to the union members, only thirty-six (36) of the thirty-seven (37) union members included in this
case were notified of the charges against them thru the letters dated June 23, 1995, but they were
not given an ample opportunity to be heard and to defend themselves; the notice of termination
came on June 26, 1995, only three (3) days from the first notice - a perfunctory and superficial
attempt to comply with the notice requirement under the Labor Code. The short interval of time
between the first and second notice speaks for itself under the circumstances of this case; mere
token recognition of the due process requirements was made, indicating the company's intent to
dismiss the union members involved, without any meaningful resort to the guarantees accorded
them by law.

Under the circumstances, where evidence sufficient to justify the penalty of dismissal has been
adduced but the workers concerned were not accorded their essential due process rights, our ruling
in Agabon v. NLRC[82] finds full application; the employer, despite the just cause for dismissal, must
pay the dismissed workers nominal damages as indemnity for the violation of the workers' right to
statutory due process. Prevailing jurisprudence sets the amount of nominal damages at P30,000.00,
which same amount we find sufficient and appropriate in the present case.[83]

WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the decision dated

February 10, 2004 and the resolution dated December 12, 2005 of the Court of Appeals in CA-G.R.
SP No. 70336, upholding the rulings of the National Labor Relations Commission.

The Decision, dated February 4, 1998, of Labor Arbiter Jovencio Ll. Mayor should prevail and is
Labor II – 1
REINSTATED with the MODIFICATION that Erlinda Vazquez, Ricardo Sacristan, Leonida Catalan,
Maximo Pedro, Nathaniela Dimaculangan, Rodolfo Mojico, Romeo Caramanza, Reynaldo Ganitano,
Alberto Basconcillo, Ramon Falcis, Angelita Balosa, Danilo Banaag, Abraham Caday, Alfonso Claudio,
Francisco Dalisay, Angelito Dejan, Philip Garces, Nicanor Ilagan, Florencio Libongcogon, Nemesio
Mamonong, Teofilo Manalili, Alfredo Pearson, Mario Perea, Renato Ramos, Mariano Rosales, Pablo
Sarmiento, Rodolfo Tolentino, Felipe Villareal, Arsenio Zamora, Danilo Baltazar, Roger
Caber, Reynaldo Camarin, Bernardo Cuadra, Angelito de Guzman, Gerardo Feliciano, Alex Ibañez,
Benjamin Juan, Sr., Ramon Macaalay, Gonzalo Manalili, Raul Miciano, Hilario Peña, Teresa
Permocillo, Ernesto Rio, Rodolfo Sanidad, Rafael Sta. Ana, Julian Tuguin, and Amelia Zamora are
each awarded nominal damages in the amount of P30,000.00. No pronouncement as to costs.

Labor II – 1
63.) G.R. No. 196156               January 15, 2014

VISAYAS COMMUNITY MEDICAL CENTER (VCMC), Formerly known as METRO CEBU COMMUNITY
HOSPITAL (MCCH), Petitioner,
vs.
ERMA YBALLE, NELIA ANGEL, ELEUTERIA CORTEZ and EVELYN ONG, Respondents.

DECISION

VILLARAMA, JR., J.:

The present petition was included in the four consolidated cases previously decided by this Court.  However, its
1

reinstatement and separate disposition became necessary due to oversight in the issuance of the order of
consolidation.

The Facts

Respondents were hired as staff nurses (Ong and Angel) and midwives (Yballe and Cortez) by petitioner Visayas
Community Medical Center (VCMC), formerly the Metro Cebu Community Hospital, Inc. (MCCHI). MCCHI is a non-
stock, non-profit corporation which operates the Metro Cebu Community Hospital (MCCH), a tertiary medical
institution owned by the United Church of Christ in the Philippines (UCCP).

Considering the similar factual setting, we quote the relevant portions of the narration of facts in our Decision dated
December 7, 2011 in Abaria v. NLRC : 2

The National Federation of Labor (NFL) is the exclusive bargaining representative of the rank-and-file employees of
MCCHI. Under the 1987 and 1991 Collective Bargaining Agreements (CBAs), the signatories were Ciriaco B.
Pongasi, Sr. for MCCHI, and Atty. Armando M. Alforque (NFL Legal Counsel) and Paterno A. Lumapguid as
President of NFL-MCCH Chapter. In the CBA effective from January 1994 until December 31, 1995, the signatories
were Sheila E. Buot as Board of Trustees Chairman, Rev. Iyoy as MCCH Administrator and Atty. Fernando Yu as
Legal Counsel of NFL, while Perla Nava, President of Nagkahiusang Mamumuo sa MCCH (NAMA-MCCH-NFL)
signed the Proof of Posting.

On December 6, 1995, Nava wrote Rev. Iyoy expressing the union’s desire to renew the CBA, attaching to her letter
a statement of proposals signed/endorsed by 153 union members. Nava subsequently requested that the following
employees be allowed to avail of one-day union leave with pay on December 19, 1995: Celia Sabas, Jesusa
Gerona, Albina Bañez, Eddie Villa, Roy Malazarte, Ernesto Canen, Jr., Guillerma Remocaldo, Catalina Alsado,
Evelyn Ong, Melodia Paulin, Sofia Bautista, Hannah Bongcaras, Ester Villarin, Iluminada Wenceslao and Perla
Nava. However, MCCHI returned the CBA proposal for Nava to secure first the endorsement of the legal counsel of
NFL as the official bargaining representative of MCCHI employees.

Meanwhile, Atty. Alforque informed MCCHI that the proposed CBA submitted by Nava was never referred to NFL
and that NFL has not authorized any other legal counsel or any person for collective bargaining negotiations. By
January 1996, the collection of union fees (check-off) was temporarily suspended by MCCHI in view of the existing
conflict between the federation and its local affiliate. Thereafter, MCCHI attempted to take over the room being used
as union office but was prevented to do so by Nava and her group who protested these actions and insisted that
management directly negotiate with them for a new CBA. MCCHI referred the matter to Atty. Alforque, NFL’s
Regional Director, and advised Nava that their group is not recognized by NFL.

In his letter dated February 24, 1996 addressed to Nava, Ernesto Canen, Jr., Jesusa Gerona, Hannah Bongcaras,
Emma Remocaldo, Catalina Alsado and Albina Bañez, Atty. Alforque suspended their union membership for serious
violation of the Constitution and By-Laws. Said letter states:

xxxx

Labor II – 1
On February 26, 1996, upon the request of Atty. Alforque, MCCHI granted one-day union leave with pay for 12
union members. The next day, several union members led by Nava and her group launched a series of mass
actions such as wearing black and red armbands/headbands, marching around the hospital premises and putting up
placards, posters and streamers. Atty. Alforque immediately disowned the concerted activities being carried out by
union members which are not sanctioned by NFL. MCCHI directed the union officers led by Nava to submit within 48
hours a written explanation why they should not be terminated for having engaged in illegal concerted activities
amounting to strike, and placed them under immediate preventive suspension. Responding to this directive, Nava
and her group denied there was a temporary stoppage of work, explaining that employees wore their armbands only
as a sign of protest and reiterating their demand for MCCHI to comply with its duty to bargain collectively. Rev. Iyoy,
having been informed that Nava and her group have also been suspended by NFL, directed said officers to appear
before his office for investigation in connection with the illegal strike wherein they reportedly uttered slanderous and
scurrilous words against the officers of the hospital, threatening other workers and forcing them to join the strike.
Said union officers, however, invoked the grievance procedure provided in the CBA to settle the dispute between
management and the union.

On March 13 and 19, 1996, the Department of Labor and Employment (DOLE) Regional Office No. 7 issued
certifications stating that there is nothing in their records which shows that NAMA-MCCH- NFL is a registered labor
organization, and that said union submitted only a copy of its Charter Certificate on January 31, 1995. MCCHI then
sent individual notices to all union members asking them to submit within 72 hours a written explanation why they
should not be terminated for having supported the illegal concerted activities of NAMA-MCCH-NFL which has no
legal personality as per DOLE records. In their collective response/statement dated March 18, 1996, it was
explained that the picketing employees wore armbands to protest MCCHI’s refusal to bargain; it was also contended
that MCCHI cannot question the legal personality of the union which had actively assisted in CBA negotiations and
implementation.

On March 13, 1996, NAMA-MCCH-NFL filed a Notice of Strike but the same was deemed not filed for want of legal
personality on the part of the filer. The National Conciliation and Mediation Board (NCMB) Region 7 office likewise
denied their motion for reconsideration on March 25, 1996. Despite such rebuff, Nava and her group still conducted
a strike vote on April 2, 1996 during which an overwhelming majority of union members approved the strike.

Meanwhile, the scheduled investigations did not push through because the striking union members insisted on
attending the same only as a group. MCCHI again sent notices informing them that their refusal to submit to
investigation is deemed a waiver of their right to explain their side and management shall proceed to impose proper
disciplinary action under the circumstances. On March 30, 1996, MCCHI sent termination letters to union leaders
and other members who participated in the strike and picketing activities. On April 8, 1996, it also issued a cease-
and-desist order to the rest of the striking employees stressing that the wildcat concerted activities spearheaded by
the Nava group is illegal without a valid Notice of Strike and warning them that non-compliance will compel
management to impose disciplinary actions against them. For their continued picketing activities despite the said
warning, more than 100 striking employees were dismissed effective April 12 and 19, 1996.

Unfazed, the striking union members held more mass actions. The means of ingress to and egress from the hospital
were blocked so that vehicles carrying patients and employees were barred from entering the premises. Placards
were placed at the hospital’s entrance gate stating:

"Please proceed to another hospital" and "we are on protest." Employees and patients reported acts of intimidation
and harassment perpetrated by union leaders and members. With the intensified atmosphere of violence and
animosity within the hospital premises as a result of continued protest activities by union members, MCCHI suffered
heavy losses due to low patient admission rates. The hospital’s suppliers also refused to make further deliveries on
credit.

With the volatile situation adversely affecting hospital operations and the condition of confined patients, MCCHI filed
a petition for injunction in the NLRC (Cebu City) on July 9, 1996 (Injunction Case No. V-0006-96). A temporary
restraining order (TRO) was issued on July 16, 1996. MCCHI presented 12 witnesses (hospital employees and
patients), including a security guard who was stabbed by an identified sympathizer while in the company of Nava’s
group. MCCHI’s petition was granted and a permanent injunction was issued on September 18, 1996 enjoining the
Nava group from committing illegal acts mentioned in Art. 264 of the Labor Code.

Labor II – 1
On August 27, 1996, the City Government of Cebu ordered the demolition of the structures and obstructions put up
by the picketing employees of MCCHI along the sidewalk, having determined the same as a public nuisance or
nuisance per se.

Thereafter, several complaints for illegal dismissal and unfair labor practice were filed by the terminated employees
against MCCHI, Rev. Iyoy, UCCP and members of the Board of Trustees of MCCHI. 3

On August 4, 1999, Executive Labor Arbiter Reynoso A. Belarmino rendered his Decision  in the consolidated cases
4

which included NLRC Case No. RAB-VII-02-0309-98 filed by herein respondents. The dispositive portion of said
decision reads:

WHEREFORE, premises considered, judgment is hereby rendered dismissing the claim of unfair labor practice and
illegal dismissal and declaring the termination of the following as an offshoot of the illegal strike: Perla Nava,
Catalina Alsado, Albina Bañez, Hannah Bongcaras, Ernesto Canen, Jesusa Gerona and Guillerma Remocaldo but
directing the respondent Metro Cebu Community Hospital to pay the herein complainants separation pay in the sum
of THREE MILLION EIGHTY FIVE THOUSAND EIGHT HUNDRED NINETY SEVEN and [40]/100 (₱3,085,897.40)
detailed as follows:

xxxx

79. Erma Yballe

6/11/83 – 4/19/96: 12 years, 10 mos. (13 years)

₱5,000.00 ÷ 2 x 13 = 32,500.00

80. Eleuteria Cortez

12/13/[74]  – 4/12/96: 21 years, 4 mos. (21 years)

5

₱5,000.00 ÷ 2 x 21 = 52,500.00

81. Nelia Angel

6/01/88 – 4/12/96: 7 years, 10 mos. (8 years)

₱5,000.00 ÷ 2 x 8 = 20,000.00

82. Evelyn Ong

7/07/86 – 4/12/96: 9 years, 9 mos. (10 years)

₱5,000.00 ÷ 2 x 10 = 25,000.00

xxxx

SO ORDERED. 6

Executive Labor Arbiter Belarmino ruled that MCCHI and its administrators were not guilty of unfair labor practice.
He likewise upheld the termination of complainants union officers who conducted the illegal strike. The rest of the
complainants were found to have been illegally dismissed, thus:

We, however, see that the NAMA members deserve a different treatment. As the Court said, members of a union
cannot be held responsible for an illegal strike on the sole basis of such membership, or even on an account of their
affirmative vote authorizing the same. They become liable only if they actually participated therein (ESSO Phil., Inc.
vs. Malayang Manggagawa sa Esso 75 SCRA 73). But the illegality of their participation is placed in a state of doubt
they, being merely followers. Under the circumstances, We resort to Art. 4 of the Labor Code favoring the
workingman in case of doubt in the interpretation and implementation of laws.

Labor II – 1
Obviously swayed by the actuations of their leaders, herein complainants ought to be reinstated as a matter of
policy but without backwages for they cannot be compensated having skipped work during the illegal strike (National
Federation of Sugar Workers vs. Overseas et al. 114 SCRA 354). But with their positions already taken over by their
replacements and with strained relations between the parties having taken place, We deem it fair that complainants
except for the seven officers, should be paid separation pay of one-half (1/2) month for every year of service by the
respondent hospital. 7

Respondents and their co-complainants filed their respective appeals before the National Labor Relations
Commission (NLRC) Cebu City. On February 15, 2001, respondents and MCCHI jointly moved to defer resolution of
their appeal (NLRC Case No. V-001042-99) in view of a possible compromise. Consequently, in its Decision  dated8

March 14, 2001, the NLRC’s Fourth Division (Cebu City) resolved only the appeals filed by respondents’ co-
complainants. The dispositive portion of said decision reads:

WHEREFORE, premises considered, the decision of the Executive Labor Arbiter dismissing the complaint for unfair
labor practice and illegal dismissal is AFFIRMED with MODIFICATIONS declaring the dismissal of all the
complainants in RAB Case No. 07-02-0394-98 and RAB Case No. 07-03-0596-98 valid and legal. Necessarily, the
award of separation pay and attorney’s fees are hereby Deleted.

Resolution on RAB Case No. 07-02-0309-98 is hereby Deferred upon Joint Motion of the parties.

SO ORDERED. 9

The NLRC denied the motion for reconsideration of the above decision under its Resolution  dated July 2, 2001.
10

Having failed to reach a settlement, respondents’ counsel filed a motion to resolve their appeal on January 2, 2003.
Thus, on March 12, 2003, the NLRC-Cebu City Fourth Division rendered its Decision,  as follows:
11

WHEREFORE, premises considered, the decision of the Executive Labor Arbiter dismissing the complaint for unfair
labor practice and illegal dismissal is AFFIRMED with MODIFICATIONS declaring all the complainants to have been
validly dismissed. Necessarily, the award of separation pay and attorney’s fees are hereby Deleted.

SO ORDERED. 12

In deleting the award of separation pay and attorney’s fees, the NLRC emphasized that respondents and their co-
complainants are guilty of insubordination, having persisted in their illegal concerted activities even after MCCHI had
sent them individual notices that the strike was illegal as it was filed by NAMA-MCCH-NFL which is not a legitimate
labor organization. It held that under the circumstances where the striking employees harassed, threatened and
prevented non-striking employees and doctors from entering hospital premises, blocked vehicles carrying patients to
the hospital premises and caused anxiety to recuperating patients by displaying placards along the corridors of the
hospital, and the resulting decrease in hospital admission, refusal of suppliers to make further deliveries due to fears
of violence erupting as a result of picketing, and diminished income due to low admission rates, it would be unfair to
saddle MCCHI with the burden of paying separation pay to complainants who were validly dismissed. Respondents’
motion for reconsideration was denied by the NLRC under its Resolution  dated April 13, 2004.
13

Meanwhile, the petition for certiorari filed by respondents’ co-complainants in the Court of Appeals (CA) Cebu
Station (CA-G.R. SP No. 66540) was initially dismissed by the CA’s Eighth Division on the ground that out of 88
petitioners only 47 have signed the certification against forum shopping. On motion for reconsideration filed by said
petitioners, the petition was reinstated but only with respect to the 47 signatories. Said ruling was challenged by
complainants before this Court via a petition for review on certiorari, docketed as G.R. No. 154113 (Abaria, et al. v.
NLRC, et al.). 14

On October 17, 2008, the CA dismissed the petition in CA-G.R. SP No. 66540, as follows:

WHEREFORE, premises considered, judgment is hereby rendered AFFIRMING the Decision of the National Labor
Relations Commission (NLRC) – Fourth Division dated March 14, 2001 in NLRC Case No. V-001042-99, WITH
MODIFICATIONS to the effect that (1) the petitioners, except the union officers, shall be awarded separation pay
Labor II – 1
equivalent to one-half (1/2) month pay for every year of service, and (2) petitioner Cecilia Sabas shall be awarded
overtime pay amounting to sixty-three (63) hours.

SO ORDERED. 15

The motion for reconsideration and motion for partial reconsideration respectively filed by the complainants and
MCCHI in CA-G.R. SP No. 66540 were likewise denied by the CA.  Both parties elevated the case to this Court in
16

separate petitions: G.R. No. 187778 (Perla Nava, et al. v. NLRC, et al.) and G.R. No. 187861 (Metro Cebu
Community Hospital v. Perla Nava, et al.). Herein respondents also filed in the CA a petition for certiorari assailing
the March 12, 2003 Decision and April 13, 2004 Resolution of the NLRC, docketed as CA-G.R. SP No. 84998 (Cebu
City). By Decision  dated November 7, 2008, the CA granted their petition, as follows:
17

WHEREFORE, the challenged Decision of public respondent dated March 12, 2003 and its Resolution dated April
13, 2004 are herebyREVERSED AND SET ASIDE. Private respondent Metro Cebu Community Hospital is ordered
to reinstate petitioners Erma Yballe, Eleuteria Cortes, Nelia Angel and Evelyn Ong without loss of seniority rights
and other privileges; to pay them their full backwages inclusive of their allowances and other benefits computed
from the time of their dismissal up to the time of their actual reinstatement.

No pronouncement as to costs.

SO ORDERED. 18

Petitioner filed a motion for reconsideration which the CA denied in its February 22, 2011 Resolution. 19

The Case

The present petition (G.R. No. 196156) was filed on April 27, 2011. Records showed that as early as August 3,
2009, G.R. Nos. 187861 and 187778 were consolidated with G.R. No. 154113 pending with the Third Division.  As 20

to the present petition, it was initially denied under the June 8, 2011 Resolution  issued by the Second Division for
21

failure to show any reversible error committed by the CA. Petitioner filed a motion for reconsideration to which
respondents filed an opposition. Said motion for reconsideration of the earlier dismissal (June 8, 2011) remained
unresolved by the Second Division which, on June 29, 2011, issued a resolution ordering the transfer of the present
case to the Third Division. 22

It is further recalled that on June 23, 2011, petitioner moved to consolidate the present case with G.R. Nos. 154113,
187861 and 187778 which was opposed by respondents. Under Resolution dated August 1, 2011, the Third Division
denied the motion for consolidation, citing the earlier dismissal of the petition on June 8, 2011.  However, on motion
23

for reconsideration filed by petitioner, said resolution was set aside on October 19, 2011 and the present case was
ordered consolidated with G.R. Nos. 154113, 187778 and 187861 and transferred to the First Division where the
latter cases are pending. 24

On December 7, 2011, the Decision  in the consolidated cases (G.R. Nos. 154113, 187778, 187861 and 196156)
25

was rendered, the dispositive portion of which states:

WHEREFORE, the petition for review on certiorari in G.R. No. 187861 is DENIED while the petitions in G.R. Nos.
154113, 187778 and 196156 are PARTLY GRANTED. The Decision dated October 17, 2008 of the Court of
Appeals in CA-G.R. SP No. 66540 is hereby AFFIRMED with MODIFICATIONS in that MCCHI is ordered to pay the
petitioners in G.R. Nos. 154113 and 187778, except the petitioners who are union officers, separation pay
equivalent to one month pay for every year of service, and reasonable attorney’s fees in the amount of ₱50,000.00.
The Decision dated November 7, 2008 is likewise AFFIRMED with MODIFICATIONS in that MCCHI is ordered to
pay the private respondents in G.R. No. 196156 separation pay equivalent to one month pay for every year of
service, and that the award of back wages is DELETED.

The case is hereby remanded to the Executive Labor Arbiter for the recomputation of separation pay due to each of
the petitioners union members in G.R. Nos. 154113, 187778 and 196156 except those who have executed
compromise agreements approved by this Court.
Labor II – 1
No pronouncement as to costs.

SO ORDERED. 26

On February 7, 2012, respondents filed a Motion for Reconsideration with Motion for Severance and
Remand  asserting that they were denied due process as they had no opportunity to file a comment on the petition
27

prior to the rendition of the Decision dated December 7, 2011. They also point out that the issues in the present
case are different from those raised in the petitions filed by their co-complainants.

On June 18, 2012, this Court issued a Resolution (1) reinstating the petition and requiring the respondents to file
their comment on the petition; and (2) denying the motion for remand to the Second Division.  Respondents thus
28

filed their Comment, to which petitioner filed its Reply. Thereafter, the parties submitted their respective
memoranda.

Issues

In their Memorandum, respondents submit that since the Decision dated December 7, 2011 in the consolidated
cases of Abaria v. NLRC have already declared the dismissal of complainants union members as illegal but
awarded separation pay and reasonable attorney’s fees, the remaining issue to be resolved in this case is whether
respondents are entitled to back wages and damages.

Petitioner, however, further assail the CA in (a) allowing respondents to change their theory on appeal, (b) finding
that respondents did not commit illegal acts during the strike and (c) increasing the award of separation pay to one
month pay for every year of service as held in the December 7, 2011 Decision in view of the damages suffered by
petitioner.

Respondents’ Argument

Respondents maintain that there was no iota of evidence presented by petitioner that they took part in the illegal
strike conducted by the Nava group or committed illegal acts like the blocking of ingress and egress in the hospital
premises. They claim that they were never involved in work stoppage but instead were locked out by petitioner as
they were unable to resume work because hospital security personnel prevented them from entering the hospital
upon petitioner’s instructions.

Claiming that they have consistently manifested their non- participation in the illegal strike before the regional
arbitration branch, NLRC and the CA, respondents argue that there is absolutely no reason to delete the awards of
back wages and separation pay in lieu of reinstatement.

Petitioner’s Argument

Petitioner contends that respondents have surreptitiously changed their position from admitting in their pleadings
before the NLRC their participation in the illegal strike to that of mere wearing of arm bands and alleged non-receipt
of the notices in their appeal before the CA. They stress the established facts on record that: (1) respondents signed
the March 18, 1996 collective reply of the union officers and members to the notices sent by petitioner regarding
their illegal concerted activities, thus proving that they received the said notices; (2) acknowledged Perla Nava as
their union leader which belies respondents’ belated attempt to distance themselves from the Nava group who led
the illegal strike; and (3) respondents did not, in their motion for reconsideration of the NLRC Decision dated March
12, 2003, make any denial of their participation in the illegal strike but even justified their resort thereto due to the
prevailing labor dispute.

With the Decision in the consolidated cases (Abaria v. NLRC) having already upheld the consistent rule that
dismissed employees who participated in an illegal strike are not entitled to back wages, petitioner prays that the
previous rulings in Philippine Diamond Hotel and Resort, Inc. (Manila Diamond Hotel) v. Manila Diamond Hotel
Employees Union,  G & S Transport Corporation v. Infante,  Philippine Marine Officers’ Guild v. Compañia
29 30

Maritima, et al.,  and Escario v. National Labor Relations Commission (Third Division)  be likewise applied in this
31 32

case.
Labor II – 1
 Our Ruling

The petition is partly meritorious.

Paragraph 3, Article 264(a) of the Labor Code provides that ". . .any 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 his employment status . . ." In the Decision dated December 7, 2011, we
declared as invalid the dismissal of MCCH employees who participated in the illegal strike conducted by NAMA-
MCCH-NFL which is not a legitimate labor organization. Since there was no showing that the complainants
committed any illegal act during the strike, they may not be deemed to have lost their employment status by their
mere participation in the illegal strike. On the other hand, the union leaders (Nava group) who conducted the illegal
strike despite knowledge that NAMA-MCCH-NFL is not a duly registered labor union were declared to have been
validly terminated by petitioner.

We stress that the law makes a distinction between union members and union officers. A worker merely
participating in an illegal strike may not be terminated from employment. It is only when he commits illegal acts
during a strike that he may be declared to have lost employment status.  In contrast, a union officer may be
33

terminated from employment for knowingly participating in an illegal strike or participates in the commission of illegal
acts during a strike. The law grants the employer the option of declaring a union officer who participated in an illegal
strike as having lost his employment. It possesses the right and prerogative to terminate the union officers from
service.34

In this case, the NLRC affirmed the finding of the Labor Arbiter that respondents supported and took part in the
illegal strike and further declared that they were guilty of insubordination. It noted that the striking employees were
determined to force management to negotiate with their union and proceeded with the strike despite knowledge that
NAMA-MCCH-NFL is not a legitimate labor organization and without regard to the consequences of their acts
consisting of displaying placards and marching noisily inside the hospital premises, and blocking the entry of
vehicles and persons.

On appeal, the CA reversed the rulings of the Labor Arbiter and NLRC, ordered the reinstatement of respondents
and the payment of their full back wages. The CA found that respondents’ participation was limited to the wearing of
armband and thus, citing Bascon v. CA,  declared respondents’ termination as invalid in the absence of any
35

evidence that they committed any illegal act during the strike.

In the Decision dated December 7, 2011, we likewise ruled that the mass termination of complainants was illegal,
notwithstanding the illegality of the strike in which they participated. However, since reinstatement was no longer
feasible, we ordered MCCHI to pay the dismissed employees separation pay equivalent to one month pay for every
year of service. The claim for back wages was denied, consistent with existing law and jurisprudence. Respondents
argue that the CA correctly awarded them back wages because while they "supported the protest action" they were
not part of the Nava group who were charged with blocking the free ingress and egress of the hospital, threatening
and harassing persons entering the premises, and making boisterous and unpleasant remarks. They deny any
participation in the illegal strike and assert that no evidence of their actual participation in the strike was shown by
petitioner.

We are not persuaded by respondents’ attempt to dissociate themselves from the Nava group who led the illegal
strike. In their motion for reconsideration filed before the NLRC, respondents no longer denied having participated in
the strike but simply argued that no termination of employment in connection with the strike "staged by
complainants" cannot be legally sustained because MCCHI "did not file a complaint or petition to declare the strike
of complainants illegal or declare that illegal acts were committed in the conduct of the strike." Respondents further
assailed the NLRC’s finding that they were guilty of insubordination since "the proximate cause of the acts of
complainants was the prevailing labor dispute and the consequent resort by complainants of [sic] a strike
action."  When the case was elevated to the CA, respondents shifted course and again insisted that they did not
36

participate in the strike nor receive the March 15, 1996 individual notices sent by petitioner to the striking
employees.

Respondents’ inconsistent posture cannot be sanctioned. While there was indeed no evidence of any illegal act
committed by respondents during the strike, the Labor Arbiter and NLRC were one in finding that respondents
Labor II – 1
actively supported the concerted protest activities, signed the collective reply of union members manifesting that
they launched the mass actions to protest management’s refusal to negotiate a new CBA, refused to appear in the
investigations scheduled by petitioner because it was the union’s stand that they would only attend these
investigations as a group, and failed to heed petitioner’s final directive for them to desist from further taking part in
the illegal strike. The CA, on the other hand, found that respondents’ participation in the strike was limited to the
wearing of armbands. Since an ordinary striking worker cannot be dismissed for such mere participation in the illegal
strike, the CA correctly ruled that respondents were illegally dismissed. However, the CA erred in awarding
respondents full back wages and ordering their reinstatement despite the prevailing circumstances.

As a general rule, back wages are granted to indemnify a dismissed employee for his loss of earnings during the
whole period that he is out of his job. Considering that an illegally dismissed employee is not deemed to have left his
employment, he is entitled to all the rights and privileges that accrue to him from the employment.  The grant of
37

back wages to him is in furtherance and effectuation of the public objectives of the Labor Code, and is in the nature
of a command to the employer to make a public reparation for his illegal dismissal of the employee in violation of the
Labor Code. 38

Are respondents then entitled to back wages? This Court, in G & S Transport Corporation v. Infante,  ruled in the
39

negative:

With respect to backwages, the principle of a "fair day’s wage for a fair day’s labor" remains as the basic factor in
determining the award thereof. If there is no work performed by the employee there can be no wage or pay unless,
of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed or
otherwise illegally prevented from working. x x x In Philippine Marine Officers’ Guild v. Compañia Maritima, as
affirmed in Philippine Diamond Hotel and Resort v. Manila Diamond Hotel Employees Union, the Court stressed that
for this exception to apply, it is required that the strike be legal, a situation that does not obtain in the case at bar.
(Emphasis supplied)

The alternative relief for union members who were dismissed for having participated in an illegal strike is the
payment of separation pay in lieu of reinstatement under the following circumstances: (a) when reinstatement can
no longer be effected in view of the passage of a long period of time or because of the realities of the situation; (b)
reinstatement is inimical to the employer’s interest; (c) reinstatement is no longer feasible; (d) reinstatement does
not serve the best interests of the parties involved; (e) the employer is prejudiced by the workers’ continued
employment; (f) facts that make execution unjust or inequitable have supervened; or (g) strained relations between
the employer and employee. 40

In the Decision dated December 7, 2011, we held that the grant of separation pay to complainants is the appropriate
relief under the circumstances, thus:

Considering that 15 years had lapsed from the onset of this labor dispute, and in view of strained relations that
ensued, in addition to the reality of replacements already hired by the hospital which had apparently recovered from
its huge losses, and with many of the petitioners either employed elsewhere, already old and sickly, or otherwise
incapacitated, separation pay without back wages is the appropriate relief. x x x 41

In fine, we sustain the CA in ruling that respondents who are mere union members were illegally dismissed for
participating in the illegal strike conducted by the Nava group. However, we set aside the order for their
reinstatement and payment of full back wages.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated November 7, 2008 and Resolution dated
February 22, 2011 of the Court of Appeals in CA-G.R. SP No. 84998 are hereby AFFIRMED with MODIFICATIONS.
In lieu of reinstatement, petitioner Visayas Community Medical Center formerly known as the Metro Cebu
Community Hospital) is ordered to PAY respondents Erma Yballe, Evelyn Ong, Nelia Angel and Eleuteria Cortez
separation pay equivalent to one month pay for every year of service. The award of back wages to the said
respondents is DELETED.

The case is hereby remanded to the Executive Labor Arbiter for the recomputation of separation pay due to each of
the respondents.

Labor II – 1
64.)

SECOND DIVISION

[G.R. No. 179428 : January 26, 2011]

PRIMO E. CAONG, JR., ALEXANDER J. TRESQUIO, AND LORIANO D. DALUYON,

PETITIONERS, VS. AVELINO REGUALOS, RESPONDENT.

DECISION

NACHURA, J.:

Is the policy of suspending drivers pending payment of arrears in their boundary obligations
reasonable? The Court of Appeals (CA) answered the question in the affirmative in its
Decision [1] dated December 14, 2006 and Resolution dated July 16, 2007. In this petition for review
on certiorari, we take a second look at the issue and determine whether the situation at bar merits
the relaxation of the application of the said policy.
cralaw

Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio (Tresquio), and Loriano D. Daluyon
(Daluyon) were employed by respondent Avelino Regualos under a boundary agreement, as drivers
of his jeepneys. In November 2001, they filed separate complaints [2] for illegal dismissal against
respondent who barred them from driving the vehicles due to deficiencies in their boundary
payments.

Caong was hired by respondent in September 1998 and became a permanent driver sometime in
2000. In July 2001, he was assigned a brand- new jeepney for a boundary fee of P550.00 per day.
He was suspended on October 9-15, 2001 for failure to remit the full amount of the boundary.
Consequently, he filed a complaint for illegal suspension. Upon expiration of the suspension period,
he was readmitted by respondent, but he was reassigned to an older jeepney for a boundary fee of
P500.00 per day. He claimed that, on November 9, 2001, due to the scarcity of passengers, he was
only able to remit P400.00 to respondent. On November 11, 2001, he returned to work after his rest
day, but respondent barred him from driving because of the deficiency in the boundary payment. He
pleaded with respondent but to no avail. [3]

Tresquio was employed by respondent as driver in August 1996. He became a permanent driver in
1997. In 1998, he was assigned to drive a new jeepney for a boundary fee of P500.00 per day. On
November 6, 2001, due to the scarcity of passengers, he was only able to remit P450.00. When he
returned to work on November 8, 2001 after his rest day, he was barred by respondent because of
the deficiency of P50.00. He pleaded with respondent but the latter was adamant. [4]

On the other hand, Daluyon started working for respondent in March 1998. He became a permanent
driver in July 1998. He was assigned to a relatively new jeepney for a boundary fee of P500.00 per
day. On November 7, 2001, due to the scarcity of passengers, he was only able to pay P470.00 to
respondent. The following day, respondent barred him from driving his jeepney. He pleaded but to no
avail. [5]

During the mandatory conference, respondent manifested that petitioners were not dismissed and
that they could drive his jeepneys once they paid their arrears. Petitioners, however, refused to do
so.

Labor II – 1
Petitioners averred that they were illegally dismissed by respondent without just cause. They
maintained that respondent did not comply with due process requirements before terminating their
employment, as they were not furnished notice apprising them of their infractions and another
informing them of their dismissal. Petitioners claimed that respondent's offer during the mandatory
conference to reinstate them was an insincere afterthought as shown by the warning given by
respondent that, if they fail to remit the full amount of the boundary yet again, they will be barred
from driving the jeepneys. Petitioners questioned respondent's policy of automatically dismissing the
drivers who fail to remit the full amount of the boundary as it allegedly (a) violates their right to due
process; (b) does not constitute a just cause for dismissal; (c) disregards the reality that there are
days when they could not raise the full amount of the boundary because of the scarcity of
passengers.

In his Position Paper, respondent alleged that petitioners were lessees of his vehicles and not his
employees; hence, the Labor Arbiter had no jurisdiction. He claimed that he noticed that some of his
lessees, including petitioners, were not fully paying the daily rental of his jeepneys. In a list which he
attached to the Position Paper, it was shown that petitioners had actually incurred arrears since they
started working. The list showed that Caong's total arrears amounted to P10,315.00, that of Tresquio
was  P10,760.00, while that of Daluyon was P6,890.00. He made inquiries and discovered that his
lessees contracted loans with third parties and used the income of the jeepneys in paying the loans.
Thus, on November 4, 2001, he gathered all the lessees in a meeting and informed them that,
effective November 5, 2001, those who would fail to fully pay the daily rental would not be allowed to
rent a jeepney on the following day. He explained to them that the jeepneys were acquired on
installment basis, and that he was paying the monthly amortizations through the lease income. Most
of the lessees allegedly accepted the condition and paid their arrears. Petitioners, however, did not
settle their arrears. Worse, their remittances were again short of the required boundary fee.
Petitioner Daluyon's rent payment was short of P20.00 on November 5, 2001 and P80.00 on
November 7, 2001. On November 6, 2001, it was Tresquio who incurred an arrear of P100.00. On
November 7 and 9, 2001, petitioner Caong was in arrear of P50.00 and P100.00, respectively.
Respondent stressed that, during the mandatory conference, he manifested that he would renew his
lease with petitioners if they would pay the arrears they incurred during the said dates. [6]

On March 31, 2003, the Labor Arbiter decided the case in favor of respondent, thus:

WHEREFORE, judgment is hereby rendered, DISMISSING the above-entitled cases for lack of merit.
However, respondent Regualos is directed to accept back complainants Caong, Tresquio and Daluyon,
as regular drivers of his passenger jeepneys, after complainants have paid their respective
arrearages they have incurred in the remittance of their respective boundary payments, in the
amount of P150.00, P100.00 and P100.00. Complainants, if still interested to work as drivers, are
hereby ordered to report to respondent Regualos within fifteen (15) days from the finality of this
decision. Otherwise, failure to do so means forfeiture of their respective employments.

Other claims of complainants are dismissed for lack of merit.

SO ORDERED. [7]

According to the Labor Arbiter, an employer-employee relationship existed between respondent and
petitioners. The latter were not dismissed considering that they could go back to work once they
have paid their arrears. The Labor Arbiter opined that, as a disciplinary measure, it is proper to
impose a reasonable sanction on drivers who cannot pay their boundary payments. He emphasized
that respondent acquired the jeepneys on loan or installment basis and relied on the boundary
payments to comply with his monthly amortizations. [8]

Petitioners appealed the decision to the National Labor Relations Commission (NLRC). In its
Labor II – 1
resolution [9] dated March 31, 2004, the NLRC agreed with the Labor Arbiter and dismissed the
appeal. It also denied petitioners' motion for reconsideration. [10]

Forthwith, petitioners filed a petition for certiorari with the CA.

In its Decision [11] dated December 14, 2006, the CA found no grave abuse of discretion on the part
of the NLRC. According to the CA, the employer-employee relationship of the parties has not been
severed, but merely suspended when respondent refused to allow petitioners to drive
the jeepneys while there were unpaid boundary obligations. The CA pointed out that the fact that it
was within the power of petitioners to return to work is proof that there was no termination of
employment. The condition that petitioners should first pay their arrears only for the period of
November 5-9, 2001 before they can be readmitted to work is neither impossible nor unreasonable if
their total unpaid boundary obligations and the need to sustain the financial viability of the
employer's enterprise--which would ultimately redound to the benefit of the employees--are taken
into consideration. [12]

The CA went on to rule that petitioners were not denied their right to due process. It pointed out that
the case does not involve a termination of employment; hence, the strict application of the twin-
notice rule is not warranted. According to the CA, what is important is that petitioners were given the
opportunity to be heard. The meeting conducted by respondent on November 4, 2001 served as
sufficient notice to petitioners. During the said meeting, respondent informed his employees,
including petitioners, to strictly comply with the policy regarding remittances and warned them that
they would not be allowed to take out the jeepneys if they did not remit the full amount of the
boundary. [13]

Dissatisfied, petitioners filed a motion for reconsideration, but the CA denied the motion in its
Resolution dated July 16, 2007. [14]

Petitioners are now before this Court resolutely arguing that they were illegally dismissed
by respondent, and that such dismissal was made in violation of the due process
requirements of the law.

The petition is without merit.

In an action for certiorari, petitioner must prove not merely reversible error, but grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of respondent. Mere abuse of
discretion is not enough.  It must be shown that public respondent exercised its power  in an
arbitrary or despotic manner by reason of passion or personal hostility, and this must be so patent
and so gross as to amount to an evasion of a positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law. [15]

As correctly held by the CA, petitioners failed to establish that the NLRC committed grave abuse of
discretion in affirming the Labor Arbiter's ruling, which is supported by the facts on record.

It is already settled that the relationship between jeepney owners/operators and jeepney drivers

under the boundary system is that of employer-employee and not of lessor-lessee. The fact that the
drivers do not receive fixed wages but only get the amount in excess of the so-called "boundary" that
they pay to the owner/operator is not sufficient to negate the relationship between them as employer
and employee. [16]

The Labor Arbiter, the NLRC, and the CA uniformly declared that petitioners were not dismissed from
employment but merely suspended pending payment of their arrears. Findings of fact of the CA,
particularly where they are in absolute agreement with those of the NLRC and the Labor Arbiter, are
accorded not only respect but even finality, and are deemed binding upon this Court so long as they
are supported by substantial evidence. [17]
Labor II – 1
We have no reason to deviate from such findings. Indeed, petitioners' suspension cannot be
categorized as dismissal, considering that there was no intent on the part of respondent to sever the
employer-employee relationship between him and petitioners. In fact, it was made clear that
petitioners could put an end to the suspension if they only pay their recent arrears. As it was, the
suspension dragged on for years because of petitioners' stubborn refusal to pay. It would have been
different if petitioners complied with the condition and respondent still refused to readmit them to
work. Then there would have been a clear act of dismissal. But such was not the case. Instead of
paying, petitioners even filed a complaint for illegal dismissal against respondent.

Respondent's policy of suspending drivers who fail to remit the full amount of the boundary was fair
and reasonable under the circumstances. Respondent explained that he noticed that his drivers were
getting lax in remitting their boundary payments and, in fact, herein petitioners had already incurred
a considerable amount of arrears. He had to put a stop to it as he also relied on these boundary
payments to raise the full amount of his monthly amortizations on the jeepneys. Demonstrating their
obstinacy, petitioners, on the days immediately following the implementation of the policy, incurred
deficiencies in their boundary remittances.

It is acknowledged that an employer has free rein and enjoys a wide latitude of discretion to regulate
all aspects of employment, including the prerogative to instill discipline on his employees and to
impose penalties, including dismissal, if warranted, upon erring employees. This is a management
prerogative. Indeed, the manner in which management  conducts its own affairs to achieve its
purpose is within the management's discretion. The only limitation on the exercise of management
prerogative is that the policies, rules, and regulations on work-related activities of the employees
must always be fair and reasonable, and the corresponding penalties, when prescribed,
commensurate to the offense involved and to the degree of the infraction. [18]

Petitioners argue that the policy is unsound as it does not consider the times when passengers are
scarce and the drivers are not able to raise the amount of the boundary.

Petitioners' concern relates to the implementation of the policy, which is another matter. A company
policy must be implemented in such manner as will accord social justice and compassion to the
employee. In case of noncompliance with the company policy, the employer must consider the
surrounding circumstances and the reasons why the employee failed to comply. When the
circumstances merit the relaxation of the application of the policy, then its noncompliance must be
excused.

In the present case, petitioners merely alleged that there were only  few passengers during the dates
in question. Such excuse is not acceptable without any proof or, at least, an explanation as to why
passengers were scarce at that time. It is simply a bare allegation, not worthy of belief. We also find
the excuse unbelievable considering that petitioners incurred the shortages on separate days, and it
appears that only petitioners failed to remit the full boundary payment on said dates.

Under a boundary scheme, the driver remits the "boundary," which is a fixed amount, to the
owner/operator and gets to earn the amount in excess thereof. Thus, on a day when there are many
passengers along the route, it is the driver who actually benefits from it. It would be unfair then if,
during the times when passengers are scarce, the owner/operator will be made to suffer by not
getting the full amount of the boundary. Unless clearly shown or explained by an event that
irregularly and negatively affected the usual number of passengers within the route, the scarcity of
passengers should not excuse the driver from paying the full amount of the boundary.

Finally, we sustain the CA's finding that petitioners were not denied the right to due process. We thus
quote with approval its discussion on this matter:

Labor II – 1
Having established that the case at bench does not involve termination of employment, We find that
the strict, even rigid, application of the twin-notice rule is not warranted.

But the due process safeguards are nonetheless still available to petitioners.

Due process is not a matter of strict or rigid or formulaic process. The essence of due process is
simply the 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, as the due process
requirements are satisfied where the parties are afforded fair and reasonable opportunity to explain
their side of the controversy at hand. x x x.

xxxx

In the case at bench, private respondent, upon finding that petitioners had consistently failed to
remit the full amount of the boundary, conducted a meeting on November 4, 2001 informing them to
strictly comply with the policy regarding their remittances and warned them to discontinue driving if
they still failed to remit the full amount of the boundary. [19]
cralaw

WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated
December 14, 2006 and Resolution dated July 16, 2007 are AFFIRMED

Labor II – 1
65.) G.R. No. 198656               September 8, 2014

NANCY S. MONTINOLA, Petitioner,
vs.
PHILIPPINE AIRLINES, Respondnet.

DECISION

LEONEN, J.:

Illegally suspended employees, similar to illegally dismissed employees, are entitled to moral damages when their
suspension was attended by bad faith or fraud, oppressive to labor, or done in a manner contrary to morals, good
customs, or public policy.

Petitioner Nancy S. Montinola (Montinola) comes to this court via a petition for review on certiorari under Rule 45 of
the Rules of Court. She assails the decision  of the Court of Appeals  dated June 28, 2011 and its resolution  dated
1 2 3

September 20, 2011 in Philippine Airlines v. National Labor Relations Commission and Nancy S. Montinola.  The 4

Court of Appeals affirmed the finding of the National Labor Relations Commission that petitioner was suspended
illegally but deleted the award of moral and exemplary damages and attorney’s fees. 5

The deletion of the award of attorney’s fees and moral and exemplary damages is the subject of this petition.

Montinola was employed as a flightattendant of Philippine Airlines (PAL) since 1996.  On January 29, 2008,
6

Montinola and other flight crew members were subjected to custom searches in Honolulu, Hawaii, USA. Items from
the airline were recovered from the flight crew by customs officials. Nancy Graham (Graham), US Customs and
Border Protection Supervisor, sent an email to PAL regarding the search. The email  contained a list of PAL flight
7

crewmembers involved in the search:

FP CHUIDIAN, JUAN DE GUZMAN

FS CARTAGENA, REGINALD

FS NAVA, PETER DE GUZMAN

FS PADILLA, ANGELITO

FA CRUZ, MARIA FA MONTINOLA, NANCY

FA VICTA, ROSE ANN (Emphasis supplied)

Another email  enumerated the list of items taken from the crew members:
8

Katie,

Here is the list.

Flight Crew Blitz in gate area 10 crew. Seven of the 10 crew members had items removed from the aircraft on their
possession. Two additional bags were found on jet-way after blitz. No bonded items were found but crew removed
food items as listed:

18 bags Doritos

15 bags Banana Chips

Labor II – 1
5 pkg instant chocolate

5 bars Granola

18 bars Kit Kat

34 Chocolate flavored Goldilocks

16 Regular Goldilocks cakes

9 1st class Bulgari Kits

2 magazines

6 rolls toilet paper

9 cans soda

16 bottles of water

1 yogurt

12 small ice creams

2 jars salsa

2 bottles Orange Juice

1 bottle Cranberry Juice

1 bottle smoothie

All items returned to Philippine Airlines.

Nancy I. Graham

Supervisory CBPO

A-TCET Air

Honolulu Hi

PAL conducted an investigation. Montinola was among those implicated because she was mentioned in Graham’s
email.  On February 1, 2008, PAL’s Cabin Services Sub-Department required Montinola to comment on the
9

incident.  She gave a handwritten explanation three days after, stating that she did not take anything from the
10

aircraft. She also committed to give her full cooperation should there be any further inquiries on the matter.
11

On February 22, 2008, PAL’s International Cabin Crew Division Manager, Jaime Roberto A. Narciso (Narciso),
furnished Montinola the emails from the Honolulu customs official.  This was followed by a notice of administrative
12

charge  which Narciso gave Montinola on March 25, 2008. On April 12, 2008, there was a clarificatory hearing.  The
13 14

clarificatory hearing was conducted by a panel of PAL’s Administrative Personnel, namely, Senior Labor Counsel
Atty. Crisanto U. Pascual (Atty. Pascual), Narciso, Salvador Cacho, June Mangahas,Lina Mejias, Carolina Victorino,
and Ruby Manzano. 15

Labor II – 1
Montinola alleged that her counselobjected during the clarificatory hearing regarding PAL’s failure to specify her
participation in the alleged pilferage.  Atty. Pascual threatened Montinola that a request for clarification would result
16

in a waiver of the clarificatory hearing.  This matter was not reflected in the transcript of the hearing.  Despite her
17 18

counsel’s objections, Montinola allowed the clarificatory hearings to proceed because she "wanted to extend her full
cooperation [in] the investigation[s]." 19

During the hearing, Montinola admitted that in Honolulu, US customs personnel conducted a search of her person.
At that time, she had in her possession only the following food items: cooked camote, 3-in-1 coffee packs, and
Cadbury hot chocolate. 20

PAL, through Senior Assistant Vice President for Cabin Services Sub- Department Sylvia C.Hermosisima, found
Montinola guilty of 11 Violations  of the company’s Code ofDiscipline and Government Regulation. She was meted
21

with suspension for one (1) year without pay.  Montinola asked for a reconsideration.  Hermosisima, however,
22 23

denied her motion for reconsideration a month after. 24

Montinola brought the matter before the Labor Arbiter.  The Labor Arbiter  found her suspension illegal,  finding that
25 26 27

PAL never presented evidence that showed Montinola as the one responsible for any of the illegally taken airline
items.  The Labor Arbiter ordered Montinola’s reinstatement with backwages, inclusive of allowances and benefits
28

amounting to ₱378,630.00. 29

In addition, the Labor Arbiter awarded moral damagesin the amount of ₱100,000.00 and exemplary damages
amounting to ₱100,000.00 for the following reasons: 30

This Office observes that the records are replete with substantial evidence that the circumstances leading to
complainant’s one-year suspension without pay are characterized by arbitrariness and bad faith on the part of
respondents. The totality ofrespondents’ acts clearly shows that complainant had been treated unfairly and
capriciously, for which complainant should be awarded moral damages in the amount of One Hundred Thousand
Pesos (₱100,000.00) and exemplary damages also in the amount of One Hundred Thousand Pesos
(₱100,000.00). 31

The Labor Arbiter also awarded attorney’s feesto Montinola because she was "forced to litigate and incur expenses
to protect [her] rights."
32

PAL appealed the Labor Arbiter’sdecision to the National Labor Relations Commission (NLRC).  During the
33

pendency of the appeal, PAL submitted new evidence consisting of an affidavit executed by Nancy Graham, the
Customs and Border Protection Supervisor who witnessed the January 29, 2008 search in Honolulu.  This affidavit
34

enumerated the names of the flight crew members searchedby the Honolulu customs officials. However, the
National Labor RelationsCommission observed that "it was categorically admitted in the said declaration that Ms.
Graham did not know which items were attributable to eachof the seven crew members whom she identified and
there was no individual inventories (sic)." 35

Through the resolution  dated June 9, 2009,the National Labor Relations Commission  affirmed the decision of the
36 37

Labor Arbiter. PAL appealed the Commission’s decision to the Court of Appeals through a petition for certiorari. 38

The Court of Appeals affirmed the decisions of the Labor Arbiter and National Labor Relations Commission in
finding the suspension illegal.  However, the Court of Appeals modified the award:
39

WHEREFORE, premises considered, the petition is DENIED. Respondent NLRC’s Decision in NLRC LAC No.
01000263-09 (NLRC NCR CN 08-11137-08), dated June 9, 2009, is AFFIRMED with MODIFICATION in that the
award of moral and exemplary damages and attorney’s fees to private respondent are deleted.  (Emphasis
40

supplied)

The Court of Appeals deleted the moral and exemplary damages and attorney’s fees stating that:

Relevant to the award of moral damages, not every employee who is illegally dismissed or suspended isentitled to
damages. Settled is the rule that moral damages are recoverable only where the dismissal or suspension of the
Labor II – 1
employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner
contrary to morals, good customs or public policy. Bad faith does not simply mean negligence or bad judgment. It
involves a state of mind dominated by ill will or motive. It implies a conscious and intentional design to do a wrongful
act for a dishonest purpose orsome moral obliquity. The person claiming moral damages must prove the existence
of bad faith by clear and convincing evidence for the law always presumes good faith.

In the case at bar, there is no showing that PAL was moved by any ill will or motive in suspending private
respondent. It is evident that petitioner gave private respondent every opportunity to refute the charges against her
and to present her side as part of due process.These negate the existence of bad faith on the part of petitioner.
Under the circumstances, we hold that private respondent is not entitled to moral damages and exemplary
damages. Furthermore, the Court finds the award of attorney’s fees improper. The award of attorney’s fees was
merely cited in the dispositive portion of the decision without the RTC [sic] stating any legal or factual basis for said
award.  (Citations omitted)
41

Montinola filed a partial motion for reconsideration,  praying that the award of moral and exemplary damages and
42

attorney’s fees be reintegrated into the decision. PAL also filed a motion for reconsideration,  but its motion sought a
43

complete reversal of the decision.

The Court of Appeals denied both motions.  Only Montinola sought to continue challenging the Court of Appeals’
44

decision through a petition for review on certiorari  brought to this court.

45

The sole issue in this case is whether Montinola’s illegal suspension entitled her to an award of moral and
exemplary damages and attorney’s fees.

Montinola claims that she is entitled to moral damages because her illegal suspension was attended by bad faith,
causing her to suffer "mental anguish, fright, serious anxiety, and moral shock."  Furthermore, the illegal suspension
46

tarnished her good standing.  Prior to this incident and in her 12 years of service, she was never charged
47

administratively.  The illegal suspension likewise affected her family because it created "a state of uncertainty and
48

adversity." 49

Montinola underscores that the investigation against her was conducted in a "hasty, impetuous, harsh and
unjust"  manner. She was not properly apprised of the charges against her.  She requested for proper notice of the
50 51

acts violative of PAL’s Codeof Discipline. Instead of giving proper notice, PAL threatened that she would be waiving
her right to a clarificatory hearing if she insisted on her request.
52

Montinola likewise alleges that PAL violated its own rules by not applying the same penalty uniformly.  Flight Purser
53

Juan Chuidian III was involved in the same incident and was likewise suspended. However, on motion for
reconsideration, PAL allowed him to retire early without serving the penalty of suspension. 54

The claim for exemplary damages isanchored on Montinola’s belief that such damages "are designed to permit the
courts to mould behaviour that has socially deleterious consequences, and their imposition is required by public
policy to suppress the wanton acts of the offender."  In Montinola’s view, PAL suspended her in a "wanton,
55

oppressive, and malevolent manner." 56

Finally, Montinola argues that she is entitled to attorney’s fees because she was forced to litigate. In Article 2208,
paragraph (2) of the Civil Code, individuals forced to litigate may ask for attorney’s fees.

On the other hand, PAL argues that moral damages are only recoverable when "the dismissal of the employee was
attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy."  The company believes that Montinola failed to present clear and convincing
57

proof of bad faith.

PAL stands by how it investigated the alleged pilferage of the in-flight items in the January 29, 2008 flight. Itbelieves
that it afforded due process to Montinola and the other implicated crew members. From PAL’s point of view, she
was given an opportunity to explain her side and was even assisted by counsel of her choice. 58

Labor II – 1
PAL claims that since moral damages have not been proven, exemplary damages should likewise not be awarded. 59

Moreover, PAL argues that Montinola failed to provide basis for the award of attorney’s fees. Attorney’s fees are
only awarded when the trial court (or in this case, the Labor Arbiter) states a factual, legal, or equitable justification
for awarding the same. 60

Montinola is entitled to moral and exemplary damages. She is also entitled to attorney’s fees.

The Labor Code provides:

Art. 279. Security of Tenure – In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and other privileges and to 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.

Security of tenure of workers is not only statutorily protected, it is also a constitutionally guaranteed right.  Thus, any
61

deprivation of this right must be attended by due process of law.  This means that any disciplinary action which
62

affects employment must pass due process scrutiny in both its substantive and procedural aspects.

The constitutional protection for workers elevates their work to the status of a vested right. It is a vested right
protected not only against state action but against the arbitrary acts of the employers as well. This court in Philippine
Movie Pictures Workers’ Association v. Premier Productions, Inc.  categorically stated that "[t]he rightof a person to
63

his labor is deemed to be property within the meaning of constitutional guarantees."  Moreover, it is of that species
64

of vestedconstitutional right that also affects an employee’s liberty and quality of life. Work not only contributes to
defining the individual, it also assists in determining one’spurpose. Work provides for the material basis of human
dignity.

Suspension from work is prima facie a deprivation of this right. Thus, termination and suspension from workmust be
reasonable to meet the constitutional requirement of due process of law. It will be reasonable if it is based on just or
authorized causes enumerated in the Labor Code. 65

On the other hand, articulation of procedural due process in labor cases is found in Article 277(b) ofthe Labor Code,
which states:

(b) Subject to the constitutional right of workers to security of tenure and their right tobe protected against dismissal
except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this
Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice
containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires in accordance with the company rules and
regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision
taken bythe employer shall be without prejudice to the right of the worker to consent the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of
proving that the termination was for a valid or authorized cause shall rest on the employer.

The procedure can be summarized in this manner. First, the employer must furnish the employee with a written
notice containing the cause for termination. Second, the employer must give the employee an opportunity to be
heard. This could be done either through a position paper or through a clarificatory hearing.  The employee may
66

alsobe assisted by a representative or counsel. Finally, the employer must give another written noticeapprising the
employee of its findings and the penalty to be imposed against the employee, if any.  In labor cases, these
67

requisites meet the constitutional requirement of procedural due process, which "contemplates notice and
opportunity to be heard before judgment is rendered, affecting one’s person or property." 68

Labor II – 1
In this case, PAL complied with procedural due process as laid out in Article 277, paragraph (b) of the
LaborCode.  PAL issued a written notice of administrative charge, conducted a clarificatory hearing, and rendered a
1âwphi1

written decision suspending Montinola. However, we emphasize that the written notice of administrative charge did
not serve the purpose required under due process. PAL did not deny her allegation that there would be a waiver of
the clarificatory hearing ifshe insisted on a specific notice of administrative charge. With Montinola unable to clarify
the contents of the notice of administrative charge, there were irregularities in the procedural due process accorded
to her.

Moreover, PAL denied Montinola substantial due process.

Just cause has to be supported by substantial evidence. Substantial evidence, or "such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion,"  is the quantum of evidence required in
69

administrative bodies such as the National Labor Relations Commission. It is reasonable to expect the employer to
consider substantial evidence in disciplinary proceedings against its employees. The employer’s decision will be
subject to review by the LaborArbiter and National Labor Relations Commission.

The employer has the burden of proof in showing that disciplinary action was made for lawful cause.  The employer
70

must consider and show facts adequate to support the conclusionthat an employee deserves to be disciplined for
his or her acts or omissions.

PAL, however, merely relied on these pieces of information in finding administrative liability against Montinola:

1) a list of offenses found in PAL’s Code of Discipline that Montinola allegedly violated;

2) a list of flight crew members that were checked at the Honolulu airport; and

3) a list of all items confiscated from allthese flight crew members.

The lists are not sufficient to show the participation of any of the flight crew members,least of all Montinola. None of
the evidence presented show that the customs officials confiscated any of these items from her. Thus, the evidence
by themselves do not show that Montinola pilfered airline items.

Together with the manner in which the investigation proceeded, i.e., that Montinola was prevented from asking for
clarification of the charges against her, the absence of substantial evidence is so apparent that disciplining an
employee only on these bases constitutes bad faith. Under the Labor Code, Labor Arbitersare authorized by law to
award moral and exemplary damages:

Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided under this Code, the
Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30) calendar days after
the submission of the case by the parties for decision without extension, even in the absence of stenographic notes,
the following cases involving all workers, whether agricultural or non-agricultural:

....

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations[.]

The nature of moral damages is defined under our Civil Code. Article 2220 states that "[w]illful injury to property may
be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages
are justlydue. The same rule applies to breaches of contract where the defendantacted fraudulently or in bad faith."
In Primero v. Intermediate Appellate Court,  this court stated that damages, as defined in the Civil Code, is
71

recoverable in labor cases. Thus, moral damages:

. . . cannot be justified solely upon the premise (otherwise sufficient for redress under the Labor Code) that the
employer fired his employee without just cause or due process. Additional facts must be pleaded and proven to
warrant the grant of moral damages under the Civil Code, these being, to repeat, that the act of dismissal
wasattended by bad faith or fraud, or was oppressive to labor, or done ina manner contrary to morals, good
Labor II – 1
customs, or public policy;and, of course, that social humiliation, wounded feelings, grave anxiety, etc., resulted
therefrom. 72

The employee is entitled to moral damages when the employer acted a) in bad faith or fraud; b) in a manner
oppressive to labor; or c) in a manner contrary to morals, good customs, or public policy.

Bad faith "implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral
obliquity."  Cathay Pacific Airways v. Spouses Vazquez  established that bad faith must be proven through clear
73 74

and convincing evidence.  This is because "[b]adfaith and fraud . . . are serious accusations that can be so
75

conveniently and casually invoked, and that is why they are never presumed. They amount to mere slogans or
mudslinging unless convincingly substantiated by whoever is alleging them."  Here, there was clear and convincing
76

evidence of bad faith adduced in the lower tribunals.

PAL’s actions in implicating Montinola and penalizing her for no clear reason show bad faith. PAL’s denial of her
request to clarify the charges against her shows its intent to do a wrongful act for moral obliquity. If it were acting in
good faith, it would have gathered more evidence from its contact in Honolulu or from other employees before it
started pointing fingers. PAL should not have haphazardly implicated Montinola and denied her livelihood even for a
moment.

PAL apparently granted Montinola procedural due process by giving her a notice of administrative charge and
conducting a hearing. However, this was more apparent than real. The notice of administrative charge did not
specify the acts committed by Montinola and how these acts violated PAL’s Code of Discipline. The notice did not
state which among the items confiscated by the US customs officials were originally found in Montinola’s
possession. Worse, the panel of PAL officers led by Atty. Pascual did not entertain any query toclarify the charges
against her.

There is denial of an opportunity to be heard if the employee is not clearly apprised of the acts she committed that
constituted the cause for disciplinary action. The Omnibus Rules Implementing the Labor Code requires that "a
written notice [be] served on the employee specifying the ground or grounds for termination, and giving said
employee reasonable opportunity within which to explain his side."  Reasonable opportunity has been described as
77

"every kind of assistance that managementmust accord to the employees to enable them to prepare adequately for
their defense." 78

When the alleged participation of the employee in the illicit act which serves as a basis for the disciplinary action is
not clear from the notice, the opportunity to be heard will not be reasonable. The notice fails to meet reasonable
standards. It does not have enough information to enable the employee to adequatelyprepare a defense.

Moreover, the list of provisions in PAL’s Code of Discipline allegedly violated was long and exhaustive.  PAL’s
1âwphi1

notice of administrative charge stated that it had probable cause to administratively chargeMontinola of the
following:

I. ILLEGAL ACTS – Section 2/Article 20

....

As a cabin attendant you should know very well the laws, rules and regulations of every country in which the
Company operates including the entry/exit requirements to which your cabin crew must adhere.

II. VIOLATION OF LAW/GOVERNMENT REGULATIONS – Section 6/Article 46

....

Incident is a violation of the Entry/Exit requirements in HNL Station, as quoted:

Labor II – 1
"Note: U.S. Customs Trade Law/Sec. 301 on Intellectual Property Right prohibits bringing of counterfeit consumer
goods such as fake bags, clothes, shoes, colognes, books, medicine, audio/video tapes & CD’s." (ref. Entry-Exit
Requirements Quick Reference Guide–Transpacific)

III. ANTI-COMPANY OFFENSES – Article 44/Section 5

....

As noted on the e-mail report from HNL Station dated 30 January 2008, PAL will be penalized by customs and
border protection – HNL due to cabin crew took items again from the aircraft upon arrival.

Article 26 NON-OBSERVANCE OF QUALITY STANDARDS

....

As a cabin attendant, it is yourresponsibility to strictly adhered [sic] to the rules, regulations, prescriptions, mandates
and policies of the Company.

Article 28 INEFFICIENCY AND WASTE

....

The subject items confiscated at the holding gate area are Company supplies and resources which must only be
consumed or utilized reasonably inflight [sic].

Article 37 ANTI-TEAMWORK OFFENSES

....

In the email report from HNL Station, Ms. Nancy Graham, CBP–Supervisor your name was specifically listed as part
of the cabin crew members who were involved in the Flight

Crew Blitz in gate area.

Article 38 INSUBORDINATIONS OR WILLFUL DISOBEDIENCE

....

Article 58 MISHANDLING/MISUSE OF COMPANY FUNDS, PROPERTY OR RECORDS

....

The subject items confiscated at the holding gate area are Company supplies and resources which must only be
consumed or utilized reasonably inflight [sic].

Article 59 THEFT, PILFERAGE, OR EMBEZZLEMENT

....

As noted on the e-mail reports from HNL Station both from Station Supervisor, Ms. Keity Wells and Ms. Nancy
Graham, CBP–Supervisor, The different items confiscated are taken by the cabin crew from the aircraft upon arrival.

Article 61 UNOFFICIAL USE OF COMPANY PROPERTY AND FACILITIES

Labor II – 1
 ....

IV. FAILURE ON THE JOB – Article 25/Section 2

....

As a cabin attendant, you should know very well the certain laws, rules and regulations ofevery country in which the
Company operates. Thus, adherence (sic) to these rules and regulations is a must. 79

To constitute proper notice, the facts constitutive of the violations of these rules — and not just the rules of conduct
— must be clearly stated. Proper notice also requires that the alleged participation of the employee be clearly
specified. Without these, the most fundamental requirement of a fair hearing cannot be met.

Parenthetically, we note that the enumeration of rules violated even included violation of "U.S. Customs Trade
Law/Sec. 301 on Intellectual Property Right." This has no bearing on the basis for the termination or suspension of
the employee. It only serves to confuse. At worse, it is specified simply to intimidate.

Montinola was found by PAL to be guilty of allthe charges against her. According to PAL, "[t]hese offenses call for
the imposition of the penalty of Termination, however, we are imposing upon you the reduced penalty of One (01)
year Suspension."  It is not clear how she could violate all the prestations in the long list of rules she allegedly
80

violated. There is also no clear explanation why termination would be the proper penalty to impose. That the penalty
was downgraded, without legal explanation, to suspension appears as a further badgeof intimidation and bad faith
on the part of the employer.

Nothing in PAL’s action supports the finding that Montinola committed specific acts constituting violations of PAL’s
Code of Discipline.

This act of PAL is contrary tomorals, good customs, and public policy. PAL was willing to deprive Montinola of the
wages she would have earned during her year of suspension even if there was no substantial evidence that she
was involved in the pilferage.

Moral damages are, thus, appropriate. In Almira v. B.F. Goodrich Philippines, this court noted that unemployment
"brings untold hardships and sorrows on those dependent on the wage-earner."  This is also true for the case of
81

suspension. Suspension istemporary unemployment. During the year of her suspension, Montinola and her family
had to survive without her usual salary. The deprivation of economic compensation caused mental anguish, fright,
serious anxiety, besmirched reputation, and wounded feelings. All these are grounds for an award of moral
damages under the Civil Code. 82

II

Montinola is also entitled to exemplary damages.

Under Article 2229 of the Civil Code, "[e]xemplary or corrective damages are imposed, by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages." As this
court has stated in the past: "Exemplary damages are designed by our civil law to permit the courts to reshape
behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such
behaviour." 83

If the case involves a contract, Article 2332 of the Civil Code provides that "the court may award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless,oppressive or malevolent manner." Thus, in Garcia
v. NLRC,  this court ruled that in labor cases, the court may award exemplary damages "if the dismissal was
84

effected in a wanton, oppressive or malevolent manner." 85

It is socially deleterious for PAL to suspend Montinola without just cause in the manner suffered by her.Hence,
exemplary damages are necessary to deter future employers from committing the same acts.

Labor II – 1
 III

Montinola is also entitled to attorney’s fees.

Article 2208 of the Civil Code enumerates the instances when attorney’s fees can be awarded:

ART. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation,other than judicialcosts, cannot
be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted ingross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid,
just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of
litigation should be recovered.

In all cases, the attorney’s fees and expenses of litigation must be reasonable. (Emphasis supplied)

This case qualifies for the first, second, and seventh reasons why attorney’s fees are awarded under the Civil Code.

First, considering thatwe have awarded exemplary damages in this case, attorney’s fees canlikewise be awarded.

Second, PAL’s acts and omissionscompelled Montinola to incur expenses to protect her rights with the National
Labor Relations Commission and the judicial system. She went through four tribunals, and she was assisted by
counsel. These expenses would have been unnecessary if PAL had sufficient basis for its decision to discipline
Montinola.

Finally, the action included recovery for wages. To bring justice to the illegal suspension of Montinola, she asked for
backwages for her year of suspension:

PAL argued that the factual, legal, or equitable justification for awarding attorney's fees must be stated in the Labor
Arbiter's decision. The legal justification of the Labor Arbiter is apparent in the decision:

Complainant's claim for attorney's fees is also justified. It is settled that where an employee was forced 'to litigate
and incur expenses to protect his rights and interest, as in the instant case, he is entitled to an award of attorney's
fees (Building Case Corp. vs. NLRC, G.R. No. 94237, February 26, 1997). She is thus granted attorney's fees
equivalent to ten percent of the total award. 86

Labor II – 1
We find no factual, legal, or equitable reason to depart from this justification. Hence, we also affirm the award of
attorney's fees equivalent to 10% of the total award, or ₱57,863.00. 87

We acknowledge the right of PAL to be constantly vigilant to prevent and deter pilferage. After all, that is equally its
property which is also protected by the Constitution. However, PAL cannot assume liability on the employee. It has
to endeavor to move through its administrative investigations more humanely and more in consonance with the law.
Its employees may only have their work. It is their work, no matter what the classification and how significant they
may be in the eyes of their employer, that should give them their dignity.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 112552 is
MODIFIED in order to REINTEGRATE the award for moral damages of ₱100,000.00, exemplary damages of
₱100,000.00, and attorney's fees of ₱57,863.00.

Labor II – 1
 66.) G.R. No. 213486, April 26, 2017

EDITHA M. CATOTOCAN, Petitioner, v. LOURDES SCHOOL OF QUEZON CITY, INC./LOURDES

SCHOOL, INC. AND REV. FR. CESAR F. ACUIN, OFM CAP, RECTOR, Respondent.

DECISION

PERALTA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of
the Decision1 dated October 29, 2013 and Resolution2 dated July 15, 2014 of the Court of Appeals in
CA-G.R. SP No. 120117, which dismissed the Petition for  Certiorari under Rule 65 of the 1997 Rules
of Civil Procedure filed by Editha M. Catotocan, and affirmed the October 20, 20103 and May 13,
20114 Orders of the National Labor Relations Commission.

The facts, as culled from the records, are as follows:

In 1971, Editha Catotocan (Catotocan) started her employment in Lourdes School of Quezon City
(LSQC) as music teacher with a monthly salary of Thirty Thousand and Eighty-One Philippine Pesos
(Php30,081.00). By the school year 2005-2006, she had already served for thirty-five (35) years.

LSQC has a retirement plan providing for retirement at sixty (60) years old, or separation pay
depending on the number of years of service.

On November 25, 2003, LSQC issued Administrative Order No. 2003-004 for all employees which is
an addendum on its retirement policy. The portion on Normal Retirement reads, as follows:

xxxx

NORMAL RETIREMENT:

1. An employee may apply for retirement or be retired by the school when he /she reaches the age of
sixty (60) years or when he/she completes thirty (30) years of service, whichever comes first;

x x x 5

In a Letter6 dated March 23, 2004, Catotocan and seven (7) other co-employees wrote to the
Provincial Minister, Provincial Council on Education of LSQC and appealed for the deferment of the
implementation of the November 25, 2003 Addendum to the retirement plan, particularly the
provision that normal retirement will commence after completing "30 years of service" to the school.
They, likewise, requested the priest of the Capuchin Order who were running the school to allow
them to retire when they have reached 60 years of age instead so that they can "fully enjoy the
fruits" of their labor.

In a Reply7 to the Letter, dated April 25, 2004, LSQC Provincial Minister and Chairman of the Board of
Trustees Fr. Troadio de los Santos informed them that the contested retirement age was the same as
provided in the retirement plans of other schools.

In a Letter8 dated September 3, 2004, Catotocan, among other employees, wrote once more to the
Provincial Minister and informed him that they have conducted a survey among other private schools'
retirement plans and the retirement age is sixty years old regardless of the length of service. They

Labor II – 1
believed that they do not deserve to be retired and be rehired when they are, in fact, very much
capable of doing their duties and responsibilities.

On October 12, 2004, Fr. Troadio de los Santos informed them that since there is a pending case
before the Arbitration Branch of the NLRC entitled "Tiongson v. Lourdes School, Quezon City, et al. "
docketed as NLRC NCR Case No. 00-04-05164-04, it would be best if they just wait for the final
determination of the case by the appropriate tribunal.

On October 26, 2004, Catotocan and her co-employees sought the intervention of the Department of
Labor and Employment-National Capital Region (DOLE-NCR). Their concerns were referred to Atty.
Jose Mari Villaflor, Chief Public Assistance and Complaints Unit (PACU) Officer. A meeting between
Catotocan and the teachers affected by the 30-year service retirement clause, and the school rector
and treasurer ensued on November 22, 2004. During the said meeting, one of the complainants
asked Atty. Villaflor if the school can compel them to retire and Atty. Villaflor advised that doing so
will be tantamount to constructive dismissal. The meeting was re-scheduled to January 7, 2005, but
the school officials no longer attended.

However, in a Letter9 dated January 27, 2005, LSQC Rector Fr. Cesar Acuin (Fr. Acuin) notified
Catotocan that she will be retired by the end of the school year for having served at least thirty (30)
years with accompanying computation of her retirement pay in the total amount of One Million Fifty-
Two Thousand Eight Hundred Thirty-Five Philippine Pesos (Php 1,052,835.00). At the time the said
letter was served on Catotocan, she was fifty-six (56) years old.

On March 3, 2005, a dialogue with Fr. Luis Arrieta and the concerned employees took place wherein
the latter expressed their objections to the 30-year service requirement for retirement.

LSQC retired Catotocan sometime in June 2006 after completing thirty-five (35) years of service. Full
retirement benefits were given to her computed based on the latest salary multiplied by the total
years of service. Under the school's retirement policy, sixty percent (60%) of her retirement benefit
was paid in lump sum by the trustee bank, and the balance was to be paid in equal monthly pensions
over the next three (3) years. The trustee bank holding the retirement portfolio of LSQC was Banco
De Oro (BDO).

On May 20, 2006, LSQC Treasurer, Fr. Rolando Brines, sent to the Senior Manager of BDO a letter
requesting the release of 60% of the retirement benefit to the retirees through their individual
savings account on June 1, 2006. Catotocan was thus credited with thirty-five (35) years of service
and her total retirement benefit amounted to One Million Fifty-Two Thousand Eight Hundred Thirty-
Five Philippine Pesos (Php1,052.835.00). Sixty percent (60%) of that amount, or Five Hundred
Seventy-One Thousand Seven Hundred and One Philippine Pesos (Php571,701.00) was credited to
her savings account, which she opened in accordance with the school's retirement policy. The
remaining forty percent (40%) in the amount of Four Hundred Twenty-One Thousand One Hundred
and Thirty-Four Philippine Pesos (Php421,134.00) was divided into thirty-six (36) equal monthly
installments of Eleven Thousand Six Hundred Ninety-Eight Philippine Peso and 17/100
(Php11,698.17) each and credited to Catotocan's savings account until June 2009.

Catotocan's retirement, effective June 2006, was communicated to her on January 27, 2006. In the
same letter, Catotocan was told that if she desires, she may signify in writing her intent to continue
serving the school on a contractual basis. She responded by submitting a "Letter of Intent" on
February 14, 2006.10

On May 11, 2006, LSQC appointed Catotocan as a Grade School Guidance Counselor for the school
year 2006-2007 under a contractual status effective June 1, 2006 until March 31, 2007.11

Labor II – 1
On August 16, 2006, Catotocan, together with other "retirees" who were re-hired, wrote the LSQC
Rector to request that they be included in the Valucare Health Maintenance Plan of the school, under
the scheme that they will shoulder the cost of the health plan through salary deduction.12 The Rector,
Fr. Acuin, granted the request.13

The following school year, Catotocan re-applied for the position of Guidance Counselor. This was
granted by the LSQC Rector in his Letter dated March 23, 2007 wherein Catotocan was appointed as
Grade School Guidance Counselor for Grades 5 and 6 effective June 1, 2007 until March 31, 2008.

Again, on February 15, 2008, Catotocan re-applied as Guidance Counselor for school year 2008-
2009.14 On April 9, 2008, LSQC appointed her to the same post effective May 12, 2008 until April 3,
2009.15

In a Letter16 dated January 29, 2009, Catotocan re-applied for the position of GS Guidance
Counselor, but LSQC no longer considered her application for the position.

On June 25, 2009, before the Labor Arbiter, Catotocan filed a complaint docketed as NLRC-NCR-Case
No. 06-09340-2009 for illegal dismissal and monetary claims such as claim for step increment, moral
and exemplary damages and attorney's fees.17

On March 26, 2010, in a Decision,18 the Labor Arbiter dismissed Catotocan's complaint for lack of
merit. The Labor Arbiter pointed out that, although there were exchanges of communications
between her and respondents regarding her earlier opposition to the school's retirement policy, her
subsequent actions, however, such as opening her own individual savings account where the
retirement benefits were deposited and credited thereto, her subsequent withdrawals therefrom, her
application for contractual employment after her retirement, constituted implied consent to the
assailed addendum in LSQC's retirement policy and, in effect, abandoned her objection thereto.

On appeal, on October 20, 2010,19 the NLRC affirmed the Labor Arbiter's decision. The NLRC held
that Catotocan performed all the acts that a retired employee would do after retirement under the
new school policy. These were voluntary acts and she cannot be considered to have been forced to
retire or to have been illegally dismissed.

Catotocan moved for reconsideration, but the same was denied in a Resolution dated May 13, 2011.

Dissatisfied, Catotocan filed a petition for certiorari before the Court of Appeals.

In the disputed Decision20 dated October 29, 2013, the Court of Appeals dismissed the petition for
lack of merit. The NLRC Decision dated October 20, 2010 and Resolution dated May 13, 2011 were
affirmed. The appellate court agreed that while Catotocan was initially opposed to the idea of her
retirement at an age below 60 years, her subsequent actions, however, after her retirement are
tantamount to consent to the addendum to the school's retirement policy of retiring from service
upon serving the school for at least thirty (30) continuous years.

Hence, this appeal anchored on the following grounds:

WHETHER THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OF JURISDICTION IN NOT APPLYING THE PRINCIPLE OF STARE DECISIS, THERE BEING A
PRIOR DECISION ALREADY ON SIMILAR CASE INVOLVING THE LOURDES SCHOOL AND THE SAME
ISSUE OF FORCED RETIREMENT BEFORE THE AGE OF SIXTY (60);

II
Labor II – 1
WHETHER THE COURT OF APPEALS' FINDING THAT PETITIONER RETIRED BY ACQUIESCENCE OR BY
IMPLICATION, WHEN SHE OPENED A BANK ACCOUNT TO RECEIVE HER RETIREMENT BENEFITS
AFTER 30 YEARS OF SERVICE BUT BEFORE AGE 60, AND ACCEPTING FOR 3 YEARS CONTRACTUAL
EMPLOYMENT IS CONTRARY TO THE JACULBE CASE AND THE COURT DOCTRINE IN LOURDES A.
CERCADO VS. UNIPROM, INC., WHERE IT WAS HELD THAT ASSENT TO EARLY RETIREMENT BEFORE
THE AGE OF 60 IS VALID ONLY IF EXPRESSLY GIVEN AND NOT BY IMPLIED ACTS AS ACCEPTANCE
OF RETIREMENT PAY, AND WILL NOT BAR TO THE PURSUIT OF AN ILLEGAL DISMISSAL CASE;

III

WHETHER ESTOPPEL WILL APPLY AFTER THE ACCEPTANCE OF RETIREMENT PAY AND WILL OPERATE
TO WAIVE THEIR LEGAL RIGHT TO CONTEST HER ILLEGAL DISMISSAL.

In a nutshell, Catotocan asserts that her receipt of her retirement benefits will not stop her
from pursuing an illegal dismissal complaint against LSQC.

We deny the petition.

Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer
and the employee whereby the latter, after reaching a certain age, agrees to sever his or her
employment with the former. Article 287 of the Labor Code is the primary provision which governs
the age of retirement and states:

Art. 287. Retirement. x x x x

xxx

In the absence of a retirement plan or agreement providing for retirement benefits of

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

Under this provision, the retirement age is primarily determined by the existing agreement or
employment contract. Only in the absence of such an agreement shall the retirement age be fixed by
law, which provides for a compulsory retirement age at 65 years, while the minimum age for optional
retirement is set at 60 years.21

Jurisprudence is replete with cases discussing the employer's prerogative to lower the compulsory
retirement age subject to the consent of its employees. In Pantranco North Express, Inc. v.
NLRC,22 the Court upheld the retirement of the private respondent therein pursuant to a CBA allowing
the employer to compulsorily retire employees upon completing 25 years of service to the company.
Interpreting Article 287, the Court held that the Labor Code permits employers and employees to fix
the applicable retirement age lower than 60 years of age.23

Thus, retirement plans, as in LSQC's retirement plan, allowing employers to retire employees who
have not yet reached the compulsory retirement age of 65 years are not per se repugnant to the
constitutional guaranty of security of tenure. By its express language, the Labor Code permits
employers and employees to fix the applicable retirement age at 60 years or below, provided that the
employees' retirement benefits under any CBA and other agreements shall not be less than those
provided therein.24

Labor II – 1
Indeed, acceptance by the employees of an early retirement age option must be explicit, voluntary,
free, and uncompelled. While an employer may unilaterally retire an employee earlier than the legally
permissible ages under the Labor Code, this prerogative must be exercised pursuant to a mutually
instituted early retirement plan. In other words, only the implementation and execution of the option
may be unilateral, but not the adoption and institution of the retirement plan containing such
option.25 However, We already had the occasion to strike down the added requirement that an
employer must first consult its employee prior to retiring him, as this requirement unduly constricts
the exercise by management of its option to retire the said employee. Due process only requires that
notice of the employer's decision to retire an employee be given to the employee.26

Here, the CA and the NLRC did not gravely abuse its discretion in finding that LSQC did not illegally
dismiss Catotocan from service. While it may be true that Catotocan was initially opposed to the idea
of her retirement at an age below 60 years, it must be stressed that Catotocan's subsequent actions
after her "retirement" are actually tantamount to her consent to the addendum to the LSQC's
retirement policy of retiring her from service upon serving the school for at least thirty (30)
continuous years, to wit: (1) after being notified that she was being retired from service by LSQC,
she opened a savings account with BDO, the trustee bank; (2) she accepted all the proceeds of her
retirement package: the lump sum and all the monthly payments credited to her account until June
2009; (3) upon acceptance of the retirement benefits, there was no notation that she is accepting
the retirement benefits under protest or without prejudice to the filing of an illegal dismissal case. We
also did not find an iota of evidence showing that LSQC exerted undue influence against Catotocan to
acquire her consent on the school's retirement policy. Suffice it to say that from the foregoing,
Catotocan performed all the acts to ratify her retirement in accordance with LSQC's retirement policy.

We, likewise, quote the NLRC's finding that Catotocan's subsequent actions after LSQC implemented
the retirement program as to negate her allegation of illegal dismissal. We quote:

As cleared during the dialogue with Father [Arieta], if an employee is retired against her/his will, the
trustee bank would not allow the release of the trust fund to the employee. Clearly, appellant's
retirement pay was released to her up to the last centavo. She opened a savings account with BDO
for the purpose, withdrew the money, applied for re-appointment and received salaries therefore. In
doing so, she performed all the acts that a retired employee would do after retirement under the new
school policy. In view of her voluntary acts and enjoyment of the monetary benefits in accordance
with the school's new retirement plan, We cannot consider her to have been forced to retire or
illegally dismissed.

Although there was an exchange of communications about the retirees' objection to the new
retirement policy years earlier, eventually, appellant assented thereto when she opened a savings
account with BDO, withdrew the money for her personal use and applied again for a teaching job
with the school.

While it is true that the acceptance of retirement pay and her eventual appointment as Guidance
Counselor did not amount to a waiver to contest her alleged forced retirement or illegal dismissal, the
voluntary nature of her acts from June 2006 up to June 2009 clearly belies her claim of illegal
dismissal.

Obviously, appellant filed this complaint claiming illegal dismissal after she had benefited from the
proceeds of her retirement in June 2006, and received salaries as Guidance Counselor of the appellee
school for the subsequent three (3) years which ended in 2009. By her actuations, she is already
estopped from questioning the legality of the new retirement policy.

x x x27

Labor II – 1
Indeed, the most telling detail indicative of Catotocan's voluntary assent to LSQC's retirement policy
was her correspondence with the latter following her "retirement." In particular, in her Letter28 dated
January 27, 2005, Catotocan availed of the privilege of being re-hired after retirement by virtue of
the "'Contractual Employment of Retired Employees" provision of LSQC's retirement policy. It must
be emphasized that the re-hiring was exclusive only for those employees who has availed of the
retirement benefits or who has been retired by the school but who has not yet reached 65 years of
age. Thus, since Catotocan has availed of this contractual employment which is exclusively offered
only to LSQC's qualified retirees for three (3) consecutive years following her retirement, she can no
longer dispute that she has indeed legitimately retired from employment, and was not illegally
dismissed.

Moreover, in the Letter dated August 6, 2006 addressed to Fr. Acuin, Catotocan, along with other co-
employees, referred to themselves as "retirees" and even signed as "the retired employees." The
context of the letter does not, in any way, show any animosity with LSQC which would otherwise
indicate that they still harbor ill feelings towards LSQC due to their alleged illegal dismissal. Thus, We
hold that Catotocan's filing of the illegal dismissal case was just an afterthought subsequent to
LSQC's denial of her fourth re-application for the Guidance Counselor position.

Finally, the ruling in Cercado29 and Jaculbe30 cannot be applied to this case, simply because in those
cases, there was no subsequent express acknowledgment of "retirement" which is present in this
case. It must be stressed also that Catotocan's repeated application and availment of the re-hiring
program of LSQC for qualified retirees for 3 consecutive years is a supervening event that would
reveal that she has already voluntarily and freely signified her consent to the retirement policy
despite her initial opposition to it. Moreover, in contrast, in the Cercado case, Cercado was consistent
in not giving her consent to the retirement plan of her employer as in fact she refused the check
representing her retirement benefits; in this case, however, not only did Catotocan received all of her
retirement benefits but she also applied and availed the LSQC's re-hiring policy of retirees.

Although the Court has, more often than not, been inclined towards the plight of the workers and has
upheld their cause in their conflicts with the employers, such inclination has not blinded it to the rule
that justice is in every case for the deserving, to be dispensed in the light of the established facts and
applicable law and doctrine.31

WHEREFORE, premises considered, the Decision dated October 29, 2013 and the Resolution dated
July 15, 2014 of the Court of Appeals in CA-G.R. SP No. 120117 are hereby AFFIRMED.

Labor II – 1
67.) G.R. No. 190809

DE LA SALLE ARANETA UNIVERSITY, Petitioner

vs.
JUANITO c. BERNARDO, Respondent

DECISION

LEONARDO-DE CASTRO, J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by De La Salle-Araneta
University (DLS-AU) seeking the annulment and reversal of the Decision  dated June 29, 2009 and
1

Resolution  dated January 4, 2010 of the Court of Appeals in CA-G.R. SP No. 106399, which affirmed in toto the
2

Decision  of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 043416-05. The NLRC
3

reversed and set aside the Labor Arbiter's Decision  dated December 13, 2004 in NLRC NCR Case No. 00-02-
4

02729-04 and found that respondent Juanito C. Bernardo (Bernardo) was entitled to retirement benefits.

On February 26, 2004, Bernardo filed a complaint against DLS-AU and its owner/manager, Dr. Oscar Bautista (Dr.
Bautista), for the payment of retirement benefits. Bernardo alleged that he started working as a part-time
professional lecturer at DLS-AU (formerly known as the Araneta University Foundation) on June 1, 1974 for an
hourly rate of ₱20.00. Bernardo taught for two semesters and the summer for the school year 1974-1975. Bernardo
then took a leave of absence from June 1, 197 5 to October 31, 1977 when he was assigned by the Philippine
Government to work in Papua New Guinea. When Bernardo came back in 1977, he resumed teaching at DLS-AU
until October '12, 2003, the end of the first semester for school year 2003-2004. Bernardo's teaching contract was
renewed at the start of every semester and summer. However, on November 8, 2003, DLS-AU informed Bernardo
through a telephone call that he could not teach at the school anymore as the school was implementing the
retirement age limit for its faculty members. As he was already 75 years old, Bernardo had no choice but to retire. At
the time of his retirement, Bernardo was being paid ₱246.50 per hour. 5

Bernardo immediately sought advice from the Department of Labor and Employment (DOLE) regarding his
entitlement to retirement benefits after 27 years of employment. In letters dated January 20, 2004  and February 3,
6

2004,  the DOLE, through its Public Assistance Center and Legal Service Office, opined that Bernardo was entitled
7

to receive benefits under Republic Act No. 7641, otherwise known as the "New Retirement Law," and its
Implementing Rules and Regulations.

Yet, Dr. Bautista, in a letter  dated February 12, 2004, stated that Bernardo was not entitled to any kind of separation
8

pay or benefits. Dr. Bautista explained to Bernardo that as mandated by the DLS-AU's policy and Collective
Bargaining Agreement (CBA), only full-time permanent faculty of DLS-AU for at least five years immediately
preceeding the termination of their employment could avail themselves of the postemployment benefits. As part-time
faculty member, Bernardo did not acquire permanent employment under the Manual of Regulations for Private
Schools, in relation to the Labor Code, regardless of his length of service.

Aggrieved by the repeated denials of his claim for retirement benefits, Bernardo filed before the NLRC, National
Capital Region, a complaint for non-payment of retirement benefits and damages against DLS-AU and Dr. Bautista.

DLS-AU and Dr. Bautista averred that DLS-AU is a non-stock, non-profit educational institution duly organized under
Philippine laws, and Dr. Bautista was then its Executive Vice-President. DLS-AU and Dr. Bautista countered that
Bernardo was hired as a part-time lecturer at the Graduate School of DLS-AU to teach Recent Advances in Animal
Nutrition for the first semester of school year 2003-2004. As stated in the Contract for Part-Time Faculty Member
Semestral, Bernardo bound himself to teach "for the period of one semester beginning June 9, 2003 to October 12,
2003." The contract also provided that "this Contract shall automatically expire unless expressly renewed in
writing."  Prior contracts entered into between Bernardo and DLS-AU essentially contained the same provisions. On
9

November 8, 2003, DLS-AU informed Bernardo that his contract would no longer be renewed. DLS-AU and Dr.
Bautista were surprised when they received a letter from Bernardo on February 18, 2004 claiming retirement
benefits and Summons dated February 26, 2004 from the NLRC in relation to Bernardo's complaint. 10

Labor II – 1
DLS-AU and Dr. Bautista maintained that Bernardo, as a part-time employee, was not entitled to retirement benefits.
The contract between DLS-AU and Bernardo was for a fixed term, i.e., one semester. Contracts of employment for
a fixed term are not proscribed by law, provided that they had been entered into by the parties without any force,
duress, or improper pressure being brought to bear upon the employee and absent any other circumstance vitiating
consent. That DLS-AU no longer renewed Bernardo's contract did not necessarily mean that Bernardo should be
deemed retired from service.

DLS-AU and Dr. Bautista also contended that Bernardo, as a part-time employee, was not entitled to retirement
benefits pursuant to any retirement plan, CBA, or employment contract. Neither was DLS-AU mandated by law to
pay Bernardo retirement benefits. The compulsory retirement age under Article 302 [287] of the Labor Code, as
amended, is 65 years old. When the employee reaches said age, his/her employment is deemed terminated. The
matter of extension of the employee's service is addressed to the sound discretion of the employer; it is a privilege
only the employer can grant. In this case, Bernardo was effectively separated from the service upon reaching the
age of 65 years old. DLS-AU merely granted Bernardo the privilege to teach by engaging his services for several
more years after reaching the compulsory retirement age. Assuming arguendo that Bernardo was entitled to
retirement benefits, he should have claimed the same upon reaching the age of 65 years old. Under Article 291 of
the Labor Code, as amended, all money claims arising from employer-employee relations shall be filed within three
years from the time the cause of action accrues.

Still according to DLS-AU and Dr. Bautista, Bernardo had no cause of action against Dr. Bautista because the latter
was only acting on behalf of DLS-AU as its Executive Vice-President. It is a well-settled rule that a corporation is a
juridical entity with a legal personality separate and distinct from the people comprising it and those acting for and
on its behalf. There was no showing that Dr. Bautista acted deliberately or maliciously in refusing to pay Bernardo
his retirement benefits, so as to make Dr. Bautista personally liable for any corporate obligations of DLS-AU to
Bernardo.

Finally, DLS-AU asserted that Bernardo failed to establish the factual and legal bases for his claims for actual,
moral, and exemplary damages, and attorney's fees. There was no proof of the alleged value of the profits or any
other loss suffered by Bernardo because of the non-payment of his retirement benefits. There was likewise no
evidence of bad faith or fraud on the part of DLS-AU in refusing to grant Bernardo retirement benefits.

On December 13, 2004, the Labor Arbiter rendered its Decision dismissing Bernardo's complaint on the ground of
prescription, thus:

[T]he age of sixty-five (65) is declared as the compulsory retirement age under Article 287 of the Labor Code, as
amended. When the compulsory retirement age is reached by an employee or official, he is thereby effectively
separated from the service (UST Faculty Union v. National Labor Relations Commission, University of Santo
Tomas, G.R. No. 89885, August 6, 1990). As mentioned earlier, [Bernardo] is already seventy-five (75) years old,
and is way past the compulsory retirement age. If he were indeed entitled to receive his retirement pay/benefits, he
should have claimed the same ten (10) years ago upon reaching the age of sixty-five (65).

In this connection, it would be worthy to mention that the Labor Code contains a specific provision that deals with
money claims arising out of employer-employee relationships. Article 291 of the Labor Code as amended clearly
provides:

"ART 291. MONEY CLAIMS. - 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 the cause of action accrued; otherwise they
shall forever be barred.

xxxx

The prescriptive period referred to in Article 291 of the Labor Code, as amended applies to all kinds of money claims
arising from employer-employee relations including claims for retirement benefits.

The ruling of the Supreme Court in De Guzman v. Court of Appeals, (G.R. No. 132257, October 12, 1998), squarely
applies to the instant case:

Labor II – 1
"The language of Article 291 of the Labor Code does not limit its application only to "money claims specifically
recoverable under said Code, " but covers all money claims arising from employer-employee relations. Since
petitioners' demand for unpaid retirement/separation benefits is a money claim arising from their employment by
private respondent, Article 291 of the Labor Code is applicable. Therefore, petitioners' claim should be filed within
three years from the time their cause of action accrued, or forever barred by prescription. "

It cannot be denied that the claim for retirement benefits/pay arose out of employer-employee relations. In line with
the decision of the Supreme Court in De Guzman, it should be treated as a money claim that must be claimed within
three years from the time the cause of action accrued.

Thus, upon reaching the compulsory retirement age of sixty-five (65), [Bernardo] was effectively separated from the
service. Clearly, such was the time when his cause of action accrued. He should have sought the payment of such
benefits/pay within three (3) years from such time. It cannot be denied that [Bernardo] belatedly sought the payment
of his retirement benefits/pay considering that he filed the instant Complaint only ten (10) years after his cause of
action accrued. For failure to claim the retirement benefits/pay to which he claims to be entitled within three (3)
years from the time he reached the age of sixty-five (65), his claim should be forever barred. 11

The Labor Arbiter decreed:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the instant Complaint on the
ground that the claim for retirement benefits/pay is already barred by prescription.12

Bernardo appealed the foregoing Labor Arbiter's Decision to the NLRC, arguing that since he continuously worked
for DLS-AU and Dr. Bautista until October 12, 2003, he was considered retired and the cause of action for his
retirement benefits accrued only on said date. There was clearly an agreement between Bernardo and DLS-AU that
the former would continue teaching even after reaching the compulsory retirement age of 65 years. In addition,
under Republic Act No. 7641, part-time workers are entitled to retirement pay of one-half month salary for every
years of service, provided that the following conditions are present: (a) there is no retirement plan between the
employer and employees; (b) the employee has reached the age of 60 years old for optional retirement or 65 years
old for compulsory retirement; and (c) the employee should have rendered at least five years of service with the
employer. Bernardo avowed that all these conditions were extant in his case.

The NLRC, in its Decision dated June 30, 2008, reversed the Labor Arbiter's ruling and found that Bernardo timely
filed his complaint for retirement benefits. The NLRC pointed out that DLS-AU and Dr. Bautista, knowing fully well
that Bernardo already reached the compulsory age of retirement of 65 years old, still extended Bernardo's
employment. Thus, Bernardo's cause of action for payment of his retirement benefits accrued only on November 8,
2003, when he was informed by DLS-AU that his contract would no longer be renewed and he was deemed
separated from employment. The principle of estoppel was also applicable against DLS-AU and Dr. Bautista who
could not validly claim prescription when they were the ones who permitted Bernardo to work beyond retirement
age. As to Bernardo's entitlement to retirement benefits, the NLRC held:

Equally untenable is the contention that [Bernardo], being a part time employee, is not entitled to retirement benefits
under Republic Act No. 7641. Indeed, a perusal of the retirement law does not exclude a part time employee from
enjoying retirement benefits. On this score, Republic Act No. 7641 explicitly provides as within its coverage "all
employees in the private sector, regardless of their position, designation, or status, and irrespective of the method
by which their wages are paid" (Section 1, Rules Implementing the New Retirement Law) (Underlined for emphasis).
The only exceptions are employees covered by the Civil Service Law; domestic helpers and persons in the personal
service of another; and employees in retail, service and agricultural establishments or operations regularly
employing not more than ten employees (ibid). Clearly, [Bernardo] does not fall under any of the exceptions.

Lastly, it is axiomatic that retirement law should be construed liberally in favor of the employee, and all doubts as to
the intent of the laws should be resolved in favor of the retiree to achieve its humanitarian purpose (Re: Gregorio G.
Pineda, 187 SCRA 469, 1990). A contrary ruling would inevitably defy such settled rule. 13

In the end, the NLRC adjudged:

Labor II – 1
WHEREFORE, judgment is hereby rendered REVERSING and SETTING ASIDE the appealed decision of the Labor
Arbiter. Accordingly, a new one is issued finding [Bernardo] entitled to retirement benefits under Republic Act No.
7641 and ordering [DLS-AU and Dr. Bautista] to pay [Bernardo] his retirement benefits equivalent to at least one-
half (1/2) month of his latest salary for every year of his service. Other claims are hereby denied for lack of merit.
14

In a Resolution dated September 15, 2008, the NLRC denied the Motion for Reconsideration of DLS-AU and Dr.
Bautista for lack of merit.

DLS-AU filed before the Court of Appeals a Petition for Certiorari and Prohibition, imputing grave abuse of discretion
on the part of the NLRC for (1) holding that Bernardo was entitled to retirement benefits despite the fact that he was
a mere part-time employee; and (2) not holding that Bernardo's claim for retirement benefits was barred by
prescription.

The Court of Appeals promulgated its Decision on June 29, 2009, affirming in toto the NLRC judgment. The Court of
Appeals ruled that the coverage of, as well as the exclusion from, Republic Act No. 7641 are clearly delineated
under Sections 1 and 2 of the Implementing Rules of Book VI, Rule II of the Labor Code, as well as the Labor
Advisory on Retirement Pay Law; and part-time employees are not among those excluded from enjoying retirement
benefits. Labor and social laws, being remedial in character, should be liberally construed in order to further their
purpose. The appellate court also declared that the NLRC did not err in relying on the Implementing Rules of
Republic Act No. 7641 because administrative rules and regulations issued by a competent authority remain valid
unless shown to contravene the Constitution or used to enlarge the power of the administrative agency beyond the
scope intended.

The Court of Appeals additionally determined that Bernardo's cause of action accrued only upon his separation from
employment and the subsequent denial of his demand for retirement benefits. To the appellate court, the NLRC was
correct in applying the equitable doctrine of estoppel since the continuous extension of Bernardo's employment,
despite him being well over the statutory compulsory age of retirement, prevented him from already claiming his
retirement benefits for he was under the impression that he could avail himself of the same eventually upon the
termination of his employment.

The dispositive portion of the Decision of the Court of Appeals reads:

WHEREFORE, the petition is DISMISSED for lack of merit. The assailed Decision of the National Labor Relations
Commission, dated 30 June 2008, is hereby AFFIRMED in toto. [Bernardo's] application for the issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction is accordingly DENIED. 15

The Motion for Reconsideration of DLS-AU was denied by the Court of Appeals in its Resolution dated January 4,
2010.

Hence, DLS-AU lodged the present petition before us, raising the following issues:

WHETHER OR NOT PART-TIME EMPLOYEES ARE EXCLUDED FROM THE COVERAGE OF THOSE ENTITLED
TO RETIREMENT BENEFITS UNDER REPUBLIC ACT NO. [7641].

II.

WHETHER OR NOT A CLAIM FOR RETIREMENT BENEFITS FILED BEYOND THE PERIOD PROVIDED FOR
UNDER ART. 291 OF THE LABOR CODE HAS PRESCRIBED. 16

We find the instant petition bereft of merit.

Bernardo is not questioning the

termination of his employment, but

Labor II – 1
only asserting his right to retirement
benefits.

There is no dispute that Bernardo was a part-time lecturer at DLS-AU, with a fixed-term employment. As a part-time
lecturer, Bernardo did not attain permanent status. Section 93 of the 1992 Manual of Regulations for Private
Schools provided:

Sec. 93. Regular or Permanent Status. - Those who have served the probationary period shall be made regular or
permanent. Full-time teachers who have satisfactorily completed their probationary period shall be considered
regular or permanent.

Per Section 92 of the same Regulations, probationary period for academic personnel "shall not be more than three
(3) consecutive years of satisfactory service for those in the elementary and secondary levels, six (6) consecutive
regular semesters of satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of
satisfactory service for those in the tertiary level where collegiate courses are offered on the trimester basis."

Thus, jurisprudence identified the requisites which should concur for a private school teacher to acquire permanent
status, viz.: (1) the teacher is a full-time teacher; (2) the teacher must have rendered three consecutive years of
service; and (3) such service must have been satisfactory. 17

Considering the foregoing requirements, a part-time employee would not attain permanent status no matter how
long he had served the school.  Bernardo did not become a permanent employee of DLS-AU despite teaching there
18

as a part-time lecturer for a total of 27 years.

Our jurisprudence had likewise settled the legitimacy of fixed-term employment. In the landmark case of Brent
School, Inc. v. Zamora,  the Court pronounced:
19

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
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 the 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, where not expressly set down, is necessarily implied.

xxxx

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.

Labor II – 1
Such interpretation puts the seal on [Bibiso v. Victorias Milling Co., Inc.]upon the effect of the expiry of an agreed
period of employment as still good rule - a rule reaffirmed in the recent case of Escudero v. Office of the
President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous case of a teacher being served by her
school a notice of termination following the expiration of the last of three successive fixedterm employment
contracts, the Court held:

"Reyes' (the teacher's) argument is not persuasive. It loses sight of the fact that her employment was probationary,
contractual in nature, and one with a definitive period. At the expiration of the period stipulated in the contract, her
appointment was deemed terminated and the letter informing her of the non-renewal of her contract is not a
condition sine qua non before Reyes may be deemed to have ceased in the employ of petitioner UST. The notice is
a mere reminder that Reyes' contract of employment was due to expire and that the contract would no longer be
renewed. It is not a letter of termination. The interpretation that the notice is only a reminder is consistent with the
court's finding in Labajo, supra. x xx."

Bernardo's employment with DLS-AU had always been for a fixed-term, i.e., for a semester or summer. Absent
allegation and proof to the contrary, Bernardo entered into such contracts of employment with DLS-AU knowingly
and voluntarily. Hence, Bernardo's contracts of employment with DLS-AU for a fixed term were valid, legal, and
binding. Bernardo's last contract of employment with DLS-AU ended on October 12, 2003, upon the close of the first
semester for school year 2003-2004, without DLS-AU offering him another contract for the succeeding semester.

Nonetheless, that Bernardo was a part-time employee and his employment was for a fixed period are immaterial in
this case. Bernardo is not alleging illegal dismissal nor claiming separation pay. Bernardo is asserting his right to
retirement benefits given the termination of his employment with DLS-AU when he was already 75 years old.

As a part-time employee with fixed-term

employment, Bernardo is
entitled to retirement benefits.

The Court declared in Aquino v. National Labor Relations Commission  that retirement benefits are intended to help
20

the employee enjoy the remaining years of his life, lessening the burden of worrying for his financial support, and
are a form of reward for his loyalty and service to the employer. Retirement benefits, where not mandated by law,
may be granted by agreement of the employees and their employer or as a voluntary act on the part of the
employer.

In the present case, DLS-AU, through Dr. Bautista, denied Bernardo's claim for retirement benefits because only
full-time permanent faculty of DLS-AU are entitled to said benefits pursuant to university policy and the CBA. Since
Bernardo has not been granted retirement benefits under any agreement with or by voluntary act of DLS-AU, the
next question then is, can Bernardo claim retirement benefits by mandate of any law?

We answer in the affirmative.

Republic Act No. 7641 is a curative social legislation. It precisely intends to give the minimum retirement benefits to
employees not entitled to the same under collective bargaining and other agreements. It also applies to
establishments with existing collective bargaining or other agreements or voluntary retirement plans whose benefits
are Jess than those prescribed in said law. 21

Article 302 [287] of the Labor Code, as amended by Republic Act No. 7641, reads:

Art. 302 [287]. 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 Jaws and any collective bargaining agreement and other agreements: Provided however, That an
employee's retirement benefits under any collective bargaining and other agreement shall not be less than those
provided herein.

Labor II – 1
In the absence of 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.

xxxx

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 provided under Article 288
of this Code. (Emphases ours.)

Book VI, Rule II of the Rules Implementing the Labor Code clearly describes the coverage of Republic Act No. 7641
and specifically identifies the exemptions from the same, to wit:

Sec. 1. General Statement on Coverage. - This Rule shall apply to all employees in the private sector,
regardless of their position, designation or status and irrespective of the method by which their wages are
paid, except to those specifically exempted under Section 2 hereof. As used herein, the term "Act" shall refer to
Republic Act No. 7641, which took effect on January 7, 1993.

Section 2. Exemptions. - This Rule shall not apply to the following employees:

2.1 Employees of the National Government and its political subdivisions, including Government-owned
and/or controlled corporations, if they are covered by the Civil Service Law and its regulations.

2.2 Domestic helpers and persons in the personal service of another. (Deleted by Department Order No. 20 issued
by Secretary Ma. Nieves R. Confessor on May 31, 1994.)

2.3. Employees of retail, service and agricultural establishments or operations regularly employing not
more than ten (10) employees. As used in this sub-section:

(a) "Retail establishment" is one principally engaged in the sale of goods to end-users for personal or household
use. It shall lose its retail character qualified for exemption if it is engaged in both retail and wholesale of goods.

(b) "Service establishment" is one principally engaged in the sale of service to individuals for their own or household
use and is generally recognized as such.

(c) "Agricultural establishment/operation" refers to an employer which is engaged in agriculture. This term refers to

all farming activities in all its branches and includes, among others, the cultivation and tillage of the soil, production,
cultivation, growing and harvesting of any agricultural or horticultural commodities, dairying, raising of livestock or
poultry, the culture of fish and other aquatic products in farms or ponds, and any activities performed by a farmer or
on a farm as an incident to or in conjunctions with such farming operations, but does not include the manufacture
and/or processing of sugar, coconut, abaca, tobacco, pineapple, aquatic or other farm products. (Emphases ours.)

Through a Labor Advisory dated October 24, 1996, then Secretary of Labor, and later Supreme Court Justice,
Leonardo A. Quisumbing (Secretary Quisumbing), provided Guidelines for the Effective Implementation of Republic
Act No. 7641, The Retirement Pay Law, addressed to all employers in the private sector. Pertinent portions of said
Labor Advisory are reproduced below:

A. COVERAGE
Labor II – 1
RA 7641 or the Retirement Pay Law shall apply to all employees in the private sector, regardless of their position,
designation or status and irrespective of the method by which their wages are paid. They shall include part-time
employees, employees of service and other job contractors and domestic helpers or persons in the
personal service of another.

The law does not cover employees of retail, service and agricultural establishments or operations employing not
more than [ten] (10) employees or workers and employees of the National Government and its political subdivisions,
including Government-owned and/or controlled corporations, if they are covered by the Civil Service Law and its
regulations.

xxxx

C. SUBSTITUTE RETIREMENT PLAN

Qualified workers shall be entitled to the retirement benefit under RA 7641 in the absence of any individual or
collective agreement, company policy or practice. x x x (Emphasis ours.)

Republic Act No. 7641 states that "any employee may be retired upon reaching the retirement age x x x;" and "[i]n
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." The Implementing Rules provide that
Republic Act No. 7641 applies to "all employees in the private sector, regardless of their position, designation or
status and irrespective of the method by which their wages are paid, except to those specifically exempted x x x."
And Secretary Quisumbing' s Labor Advisory further clarifies that the employees covered by Republic Act No. 7641
shall "include part-time employees, employees of service and other job contractors and domestic helpers or persons
in the personal service of another."

The only exemptions specifically identified by Republic Act No. 7641 and its Implementing Rules are: (1) employees
of the National Government and its political subdivisions, including government-owned and/or controlled
corporations, if they are covered by the Civil Service Law and its regulations; and (2) employees of retail, service
and agricultural establishments or operations regularly employing not more than 10 employees.

Based on Republic Act No. 7641, its Implementing Rules, and Secretary Quisumbing's Labor Advisory, Bernardo,
as a part-time employee of DLS-AU, is entitled to retirement benefits. The general coverage of Republic Act No.
7641 is broad enough to encompass all private sector employees, and part-time employees are not among those
specifically exempted from the law. The provisions of Republic Act No. 7641 and its Implementing Rules are plain,
direct, unambiguous, and need no further elucidation. Any doubt is dispelled by the unequivocal statement in
Secretary Quisumbing's Labor Advisory that Republic Act No. 7641 applies to even part-time employees.

Under the rule of statutory construction of expressio unius est exclusio alterius, Bernardo's claim for retirement
benefits cannot be denied on the ground that he was a part-time employee as part-time employees are not among
those specifically exempted under Republic Act No. 7641 or its Implementing Rules. Said rule of statutory
construction is explained thus:

It is a settled rule of statutory construction that the express mention of one person, thing, or consequence implies
the exclusion of all others. The rule is expressed in the familiar maxim, expressio unius est exclusio alterius.

The rule of expressio unius est exclusio alterius is formulated in a number of ways. One variation of the rule is the
principle that what is expressed puts an end to that which is implied. Expressum facit cessare taciturn. Thus, where
a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be
extended to other matters.

xxxx

The rule of expressio unius est exclusio alterius and its variations are canons of restrictive interpretation. They are
based on the rules of logic and the natural workings of the human mind. They are predicated upon one's own
voluntary act and not upon that of others. They proceed from the premise that the legislature would not have made
Labor II – 1
specified enumeration in a statute had the intention been not to restrict its meaning and confine its terms to those
expressly mentioned. 22

The NLRC and the Court of Appeals did not err in relying on the Implementing Rules of Republic Act No. 7641 in
their respective judgments which favored Bernardo.

Congress, through Article 5 of the Labor Code, delegated to the Department of Labor and Employment (DOLE) and
other government agencies charged with the administration and enforcement of said Code the power to promulgate
the necessary implementing rules and regulations. It was pursuant to Article 5 of the Labor Code that then Secretary
of Labor Ma. Nieves R. Confesor issued on January 7, 1993 the Rules Implementing the New Retirement Law,
which became Rule II of Book VI of the Rules Implementing the Labor Code.

In ruling that Bernardo, as part-time employee, is entitled to retirement benefits, we do no less and no more than
apply Republic Act No. 7641 and its Implementing Rules issued by the DOLE under the authority given to it by the
Congress. Needless to stress, the Implementing Rules partake the nature of a statute and are binding as if written in
the law itself. They have the force and effect of law and enjoy the presumption of constitutionality and legality until
they are set aside with finality in an appropriate case by a competent court.23

Moreover, as a matter of contemporaneous interpretation of law, Secretary Quisumbing's Labor Advisory has
persuasive effect. It is undisputed that in administrative law, contemporaneous and practical interpretation of law by
administrative officials charged with its administration and enforcement carries great weight and should be
respected, unless contrary to law or manifestly erroneous. 24

We further find that the Implementing Rules and Secretary Quisumbing' s Labor Advisory are consistent with Article
4 of the Labor Code, which expressly mandates that "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." There
being no compelling argument herein to convince us otherwise, we uphold the legality and validity of the
Implementing Rules and Secretary Quisumbing's Labor Advisory, and likewise apply the same to Bernardo's case.

For the availment of the retirement benefits under Article 302 [287] of the Labor Code, as amended by Republic Act
No. 7641, the following requisites must concur: (1) the employee has reached the age of 60 years for optional
retirement or 65 years for compulsory retirement; (2) the employee has served at least five years in the
establishment; and (3) there is no retirement plan or other applicable agreement providing for retirement benefits of
employees in the establishment. Bernardo - being 75 years old at the time of his retirement, having served DLS-AU
for a total of 27 years, and not being covered by the grant of retirement benefits in the CBA - is unquestionably
qualified to avail himself of retirement benefits under said statutory provision, i.e., equivalent to one-half month
salary for every year of service, a fraction of at least six months being considered as one whole year. 25

Bernardo's employment was

extended beyond the compulsory
retirement age and the cause of
action for his retirement benefits
accrued only upon the termination of
his extended employment with DLS-AU.

Article 306 [291] of the Labor Code mandates:

Art. 306 [291]. Money claims. - All money claims arising from employer-employee relations accruing during the
effectivity of this Code shall be filed within three years from the time the cause of action accrued; otherwise they
shall be forever barred.

DLS-AU invokes UST Faculty Union v. National Labor Relations Commission,  wherein it was held that when an
26

employee or official has reached the compulsory retirement age, he is thereby effectively separated from the
service. And so, DLS-AU maintains that Bernardo's cause of action for his retirement benefits, which is patently a
money claim, accrued when he reached the compulsory retirement age of 65 years old, and had already prescribed
when Bernardo filed his complaint only 10 years later, when he was already 75 years old.

Labor II – 1
We are not persuaded.

The case of UST Faculty Union is not in point as the issue involved therein was the right of a union to intervene in
the extension of the service of a retired employee. Professor Tranquilina J. Marilio (Prof. Marilio) already reached
the compulsory retirement age of 65 years old, but was granted by the University of Sto. Tomas (UST) an extension
of two years tenure. We ruled in said case that UST no longer needed to consult the union before refusing to further
extend Prof. Marilio' s tenure.1âwphi1

A cause of action has three elements, to wit, (1) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting
a breach of the obligation of the defendant to the plaintiff.
27

Bernardo's right to retirement benefits and the obligation of DLS-AU to pay such benefits are already established
under Article 302 [287] of the Labor Code, as amended by Republic Act No. 7641. However, there was a violation of
Bernardo's right only after DLS-AU informed him on November 8, 2003 that the university no longer intended to offer
him another contract of employment, and already accepting his separation from service, Bernardo sought his
retirement benefits, but was denied by DLSAU. Therefore, the cause of action for Bernardo's retirement benefits
only accrued after the refusal of DLS-AU to pay him the same, clearly expressed in Dr. Bautista's letter dated
February 12, 2004. Hence, Bernardo's complaint, filed with the NLRC on February 26, 2004, was filed within the
three-year prescriptive period provided under Article 291 of the Labor Code.

Even granting arguendo that Bernardo's cause of action already accrued when he reached 65 years old, we cannot
simply overlook the fact that DLS-AU had repeatedly extended Bernardo's employment even when he already
reached 65 years old. DLS-AU still knowingly offered Bernardo, and Bernardo willingly accepted, contracts of
employment to teach for semesters and summers in the succeeding 10 years. Since DLS-AU was still continuously
engaging his services even beyond his retirement age, Bernardo deemed himself still employed and deferred his
claim for retirement benefits, under the impression that he could avail himself of the same upon the actual
termination of his employment. The equitable doctrine of estoppel is thus applicable against DLS-AU. In Planters
Development Bank v. Spouses Lopez,  we expounded on the principle of estoppels as follows:
28

Section 2, Rule 131 of the Rules of Court provides that whenever a party has, by his own declaration, act, or
omission, intentionally and deliberately led another to believe that a particular thing is true, and to act upon such
belief, he cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify it.

The concurrence of the following requisites is necessary for the principle of equitable estoppel to apply: (a) conduct
amounting to false representation or concealment of material facts or at least calculated to convey the impression
that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (b)
intent, or at least expectation that this conduct shall be acted upon, or at least influenced by the other party; and (c)
knowledge, actual or constructive, of the actual facts.

Inaction or silence may under some circumstances amount to a misrepresentation, so as to raise an equitable
estoppel. When the silence is of such a character and under such circumstances that it would become a fraud on
the other party to permit the party who has kept silent to deny what his silence has induced the other to believe and
act on, it will operate as an estoppel. This doctrine rests on the principle that if one maintains silence, when in
conscience he ought to speak, equity will debar him from speaking when in conscience he ought to remain silent.

DLS-AU, in this case, not only kept its silence that Bernardo had already reached the compulsory retirement age of
65 years old, but even continuously offered him contracts of employment for the next 10 years. It should not be
allowed to escape its obligation to pay Bernardo's retirement benefits by putting entirely the blame for the deferred
claim on Bernardo's shoulders.

WHEREFORE, premises considered, the instant Petition 1s DISMISSED for lack of merit. The Decision dated June
29, 2009 and Resolution dated January 4, 2010 of the Court of Appeals in CA-G.R. SP No. 106399 are AFFIRMED.

Labor II – 1
68.) G.R. No. 159919             August 8, 2007

COMPOSITE ENTERPRISES, INC., petitioner,

vs.
EMILIO M. CAPAROSO and JOEVE QUINDIPAN, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the
Resolution1 dated November 18, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 73791 which dismissed the
Petition for Certiorari of Composite Enterprises, Inc. (petitioner) and the CA Resolution dated September 4, 2003
which denied petitioner's Motion for Reconsideration.2

The facts:

Petitioner is engaged in the distribution and/or supply of confectioneries to various retail establishments within the
Philippines. Emilio Caparoso and Joeve P. Quindipan (respondents) were employed as its deliverymen until they
were terminated on October 8, 1999.

Respondents filed a complaint for illegal dismissal against petitioner with the National Labor Relations Commission
(NLRC). Petitioner denied that respondents were illegally dismissed, alleging that they were employed on a month-
to-month basis and that they were terminated as a result of the expiration of their contracts of employment.

On June 15, 2000, Labor Arbiter Napoleon M. Menese (Labor Arbiter) rendered a Decision3 in favor of the
respondents, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered declaring complainants to have been
illegally dismissed from employment and consequently, respondent COMPOSITE ENTERPRISES
CORPORATION is hereby ordered to immediately reinstate complainants to their respective former position
without loss of seniority rights and other privileges, with full backwages from the date of dismissal up to the
actual date of reinstatement which, as of this date, amounts to P93,155.36, as above computed.

SO ORDERED.4

On July 6, 2000, petitioner filed its Appeal with the NLRC. It also filed a Manifestation with Motion manifesting that it
cannot reinstate respondents to their former positions since their previous positions were no longer available.
Accordingly, petitioner moved that it be allowed to pay respondents separation pay in lieu of reinstatement.5

On November 8, 2000, while petitioner's appeal was pending, respondents filed with the Labor Arbiter a Motion to
Pay Complainants their Salary with Prayer for Issuance of A Writ of Execution.6

On December 19, 2000, petitioner filed with the NLRC a Motion to Resolve its motion to be allowed to pay
separation pay in lieu of reinstatement.7

On January 26, 2001, the Labor Arbiter issued a Writ of Execution directing the Sheriff to effect respondent's
reinstatement. Consistent with its stand that physical reinstatement was no longer possible, petitioner reinstated
respondents into its payroll, conditioned on the NLRC's ruling on its motion to be allowed to pay separation pay in
lieu of reinstatement.

On February 21, 2001, respondents filed an Ex-Parte Motion for Recomputation of Backwages with the Labor
Arbiter.

Labor II – 1
Meanwhile, in a Decision dated May 9, 2001, the NLRC set aside the Decision of the Labor Arbiter, holding that
there was no illegal dismissal since respondents' contracts of employment were for a fixed period.8

On May 15, 2001, petitioner filed an Ex-Parte Manifestation with the Labor Arbiter, manifesting that there was no
basis to sustain respondents' claim for reinstatement in view of the NLRC's Decision dated May 9, 2001 finding no
illegal dismissal.

In an Order dated June 14, 2001, the Labor Arbiter directed petitioner to pay respondents' accrued salaries
amounting to P143,355.52, covering the period from June 26, 2000, the date petitioner received the Labor Arbiter's
Decision, to May 9, 2001, the date of said decision's reversal by the NLRC.9

On July 23, 2001, petitioner filed an Appeal/Petition for Review For Issuance of Temporary Restraining Order and
Preliminary Injunction before the NLRC, insisting on the payment of separation pay to respondents in lieu of
reinstatement.

In an Order dated June 28, 2002, the NLRC affirmed the Labor Arbiter's Order dated June 14, 2001, holding that the
reversal on appeal of the Labor Arbiter's Decision dated June 15, 2000 did not affect respondents' entitlement to
accrued salaries pending appeal, pursuant to Article 223 of the Labor Code; that only respondent's entitlement to
backwages was forfeited; and that there was no merit to petitioner's insistence on paying separation pay to
respondents, since that there was no strong basis for petitioner's contention that reinstatement was physically
impossible due to petitioner's implementation of a retrenchment program.10

Petitioner filed a Motion for Reconsideration11 but it was denied by the NLRC in a Resolution dated September 26,
2002.12 Petitioner received said Resolution on October 7, 2002.13

Four days later, or on October 11, 2002, petitioner filed a Petition for Certiorari with the CA, docketed as CA-G.R.
SP No. 73269.

In a Resolution14 dated October 24, 2002, the CA's Special Sixteenth Division15 dismissed the petition for petitioner's
failure to present proof that its General Manager was duly authorized to sign the petition's Verification and
Certification of Non-Forum Shopping, in violation of Section 5, Rule 7 of the Revised Rules of Court.16

Within the 60-day reglementary period from date of receipt of the NLRC Resolution denying the motion for
reconsideration, petitioner, instead of filing a motion for reconsideration with the CA's Special Sixteenth Division,
filed on November 12, 2002, a second Petition for Certiorari, docketed as CA-G.R. SP No. 73791.17

In a Resolution dated November 18, 2002, the CA's Twelfth Division dismissed the petition for petitioner's failure to
attach the required affidavit of service, pursuant to the last paragraph of Section 3, Rule 46 of the Revised Rules of
Court.18

On November 26, 2002, petitioner filed a Motion for Reconsideration, attaching the affidavit of service which was
omitted in the petition.19

In a Resolution20 dated September 4, 2003, the CA denied petitioner's Motion for Reconsideration, holding that
resort to the second petition for certiorari was no longer available due to res judicata, since the dismissal order
dated October 24, 2002 in the first petition for certiorari had already become final and executory; that minute
resolutions of the court denying due course to petitions, or dismissing cases summarily for failure to comply with the
formal or substantial requirements laid down therefor by law, were actually dispositions on the merits
constituting res judicata, citing Bernarte v. Court of Appeals.21

Hence, the present petition.

Petitioner contends that the dismissal of the first petition was not a judgment on the merits as to constitute res
judicata; that Bernarte v. Court of Appeals finds no application to the instant case; and that the dismissal of the first
petition was not a dismissal with prejudice as provided by Section 5, Rule 7 of the Revised Rules of Court.

Labor II – 1
Respondents, on the other hand, contend that petitioner's procedural lapses in filing the first and second special civil
actions for certiorari are irreversible and there is nothing on record to show that the petitioner at least attempted or
subsequently made a substantial compliance with the formal or substantial requirements laid down by law; and that
petitioner's gross and utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal
construction.

The petition is impressed with merit.

Contrary to the CA's ruling, failure to comply with the non-forum shopping requirements in Section 5, Rule 7 of the
Revised Rules of Court, does not automatically warrant the dismissal of the case with prejudice. The second
paragraph of Section 5, Rule 7, is pertinent:

Section 5. Certification against forum shopping. – x x x

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of
court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or
his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary
dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions.
(Emphasis supplied)

The Rule clearly states that the dismissal is without prejudice unless otherwise stated by the court;22 and the
dismissal may be deemed with prejudice only upon proper motion and hearing. Since the dismissal was without
prejudice, it did not bar petitioner from refiling the petition for so long as it was made within the 60-day reglementary
period for filing the petition for certiorari.

Furthermore, Bernarte v. Court of Appeals finds no application to the instant case. Bernarte is cast under an entirely
different factual milieu. There, the Court denied the first petition for non-compliance with Section 4 of Circular No. 1-
88, which requires a verified statement of material dates; and the second petition was filed one year after the
dismissal of the first petition. Unlike in Bernarte, the second petition in the present case was refiled immediately after
the first petition was dismissed and within the 60-day reglementary period.

With respect to the non-attachment of the affidavit of service in the second petition, it was not fatal to the petition.
The registry receipts attached to the petition clearly show that respondents were served copies of the petition and its
annexes.23 Thus, the demands of substantial justice were satisfied by the actual receipt of the petition.24

Verily, litigation is not a game of technicalities. While the swift unclogging of court dockets is a laudable objective,
granting substantial justice is an even more urgent ideal.25 Indeed, on numerous occasions, this Court has relaxed
the rigid application of the rules to afford the parties the opportunity to fully ventilate their cases on the merits. This is
in line with the time-honored principle that cases should be decided only after giving all parties the chance to argue
their causes and defenses. Technicality and procedural imperfection should thus not serve as basis of
decisions.26 Technicalities should never be used to defeat the substantive rights of the other party.27 Every party-
litigant must be afforded the amplest opportunity for the proper and just determination of his cause, free from the
constraints of technicalities.28 In that way, the ends of justice would be better served.29 For, indeed, the general
objective of procedure is to facilitate the application of justice to the rival claims of contending parties, bearing
always in mind that procedure is not to hinder but to promote the administration of justice.30

Ordinarily, the case should be remanded to the CA for proper disposition of the petition for certiorari on the
merits;31 but that would further delay the case. Considering that the lone issue raised can be readily resolved in this
instance, the Court deems it more practical and in the greater interest of justice not to remand the case to the CA
but, instead, to resolve this case once and for all.32

Petitioner anchored its Petition for Certiorari before the CA on the ground that the NLRC gravely abused its
discretion in affirming the Order dated June 14, 2001 of the Labor Arbiter which directed petitioner to pay

Labor II – 1
respondents' accrued salaries. Petitioner insists that the NLRC should have ordered the payment of separation pay
since respondents' reinstatement to their former positions was physically impossible due to petitioner's
implementation of a retrenchment program.

The Court is not persuaded.

Article 223 (3rd paragraph) of the Labor Code,33 as amended by Section 12 of Republic Act (R.A.) No. 6715,34 and
Section 2 of the NLRC Interim Rules on Appeals under R.A. No. 6715, Amending the Labor Code,35 provide that an
order of reinstatement by the Labor Arbiter is immediately executory even pending appeal. The Court
explained the rationale of the law in Aris (Phil.) Inc. v. National Labor Relations Commission:36

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter
reinstating a dismissed or separated employee, the law itself has laid down a compassionate policy which,
once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the
workingman as to forcefully and meaningfully underscore labor as a primary social and economic force,
which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the
nation’s progress and stability.

xxxx

x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently
overwhelming reason for its execution pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that
saving act is designed to stop, although temporarily since the appeal may be decided in favor of the
appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated
employee and his family.37

Reinstatement is the restoration to a state or condition from which one has been removed or separated.38 The intent
of the law in making a reinstatement order immediately executory is much like a return-to-work order, i.e., to restore
the status quo in the workplace in the meantime that the issues raised and the proofs presented by the contending
parties have not yet been finally resolved.39 It is a legal provision which is fair to both labor and management
because while execution of the order cannot be stayed by the posting of a bond by the employer, the workers also
cannot demand their physical reinstatement if the employer opts to reinstate them only in the payroll.40

Payment of separation pay as a substitute for reinstatement is allowed only under exceptional circumstances, viz:
(1) when reasons exist which are not attributable to the fault or are beyond the control of the employer, such as
when the employer -- who is in severe financial strait, has suffered serious business losses, and has ceased
operations -- implements retrenchment, or abolishes the position due to the installation of labor-saving devices; (2)
when the illegally dismissed employee has contracted a disease and his reinstatement will endanger the safety of
his co-employees; or, (3) where a strained relationship exists between the employer and the dismissed employee.41

As regards retrenchment, it is a management prerogative consistently recognized and affirmed by this Court. It is,
however, subject to faithful compliance with the substantive and procedural requirements laid down by law and
jurisprudence.42 For retrenchment to be considered valid, the following substantial requirements must be met: (a) the
losses expected should be substantial and not merely de minimis in extent; (b) the substantial losses apprehended
must be reasonably imminent such as can be perceived objectively and in good faith by the employer; (c) the
retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and (d) the

Labor II – 1
alleged losses, if already incurred, and the expected imminent losses sought to be forestalled, must be proved by
sufficient and convincing evidence.43

In the discharge of these requirements, it is the employer who has the onus, this being in the nature of an affirmative
defense.44 In other words, it is not enough for a company to merely declare that it has implemented a retrenchment
program. It must produce adequate proof that such is the actual situation to justify the retrenchment of employees.
Normally, the condition of business losses is shown by audited financial documents like yearly balance sheets, profit
and loss statements and annual income tax returns. The financial statements must be prepared and signed by
independent auditors, failing which these can be assailed as self-serving documents.45

In this case, petitioner sought to justify the payment of separation pay instead of reinstatement on the basis of its
implementation of a retrenchment program for "serious and persistent financial difficulties."46 However, petitioner
only submitted as evidence the notice of its intention to implement a retrenchment program, which it sent to the
Department of Labor and Employment on July 25, 2000.47 It did not submit its financial statements duly audited by
an independent external auditor. Its failure to do so seriously casts doubt on its claim of losses and insistence on the
payment of separation pay.

The Court finds that the NLRC did not commit any grave abuse of discretion in issuing the Order dated June 28,
2002, affirming the Order of the Labor Arbiter dated June 14, 2001.

WHEREFORE, the petition is GRANTED insofar as the Resolutions of the Court of Appeals dated November 18,
2002 and September 4, 2003 are concerned, which are hereby REVERSED and SET ASIDE. However, in the
absence of grave abuse of discretion, the Order dated June 28, 2002 of the National Labor Relations Commission
affirming the Labor Arbiter’s Order dated June 14, 2001 is REINSTATED.

Labor II – 1
 69.) [G.R. NO. 158759 : May 26, 2005]

MARILYN T. SAGUM, Petitioner, v. COURT OF APPEALS, NATIONAL LABOR RELATIONS

COMMISSION, INSTITUTE OF INTEGRATED ELECTRICAL ENGINEERS OF THE PHILIPPINES,
INC. and/or EDWARD MENDOZA, ANTONIO HERRERA, JR., AMADOR C[A]LADO, JR., * and FE
BARRIENTOS, Respondents.

DECISION

PUNO, J.:

Petitioner Marilyn T. Sagum is another hapless employee whose dismissal was ruled to be illegal but,
without her reinstatement forthcoming, is still on the outside looking in.1

At bar is a Petition for Review on Certiorari2 assailing the Decision and the Resolution of the Court of
Appeals in CA-G.R. SP No. 68790 dated June 28, 2002 and April 2, 2003, respectively. The appellate
court declared the dismissal of petitioner as illegal and ordered the payment of her full backwages
but did not decree her reinstatement and denied her claim for damages.

The instant case arose from the complaint of petitioner for illegal dismissal3 against private
respondents Institute of Integrated Electrical Engineers of the Philippines, Inc. (IIEE), Engrs. Edward
L. Mendoza, Amador C. Calado, Jr., Antonio S. Herrera, Jr., and Fe M. Barrientos. Private respondent
institute, a professional organization duly existing under Philippine laws, is the association of all
licensed electrical engineers in the country. Private respondents Mendoza, Calado, Herrera and
Barrientos were duly elected for the positions of President, Vice-President-Internal Affairs, National
Treasurer and National Secretary, respectively, in 1996.4 The officers of private respondent institute
are elected annually by its members and are supported administratively by a permanent
staff.5 Petitioner was a member of the permanent staff for sixteen (16) years.

Petitioner was hired as a Recording/Filing Clerk in June 1980. By her efficiency, loyalty and
dedication to the service, she was promoted as Membership Secretary in April 1981, Acting Executive
Secretary in February 1986, and Executive Secretary in September 1986. As Executive Secretary,
she has served eleven (11) National Presidents.

After eight (8) years, or on September 17, 1994, petitioner was appointed as Office Manager6 in
concurrent capacity as Executive Secretary. With her dual position, she was tasked to oversee the
daily operations of private respondent institute, supervise the office staff, take the minutes of the
officers' meetings and inform the staff of policies approved by the officers during board meetings.
Petitioner was also in charge of the purchase of materials and the printing requirements of the
association, a member of the bidding committee, and recommended approval for all purchases to the
National Secretary.7

The following year, on May 23, 1995, petitioner was appointed as Officer-in-Charge for the Executive
Director.8 She had two (2) immediate subordinates to assist her in her functions: Maan Dela Torre
(Dela Torre) as Administrative Secretary and Jude Magayones as Clerk/Stenographer.9

Barely after a year, on July 30, 1996, petitioner was preventively suspended for thirty (30) days. She
was served two (2) written notices10 demanding her explanation for the imputed offenses and
indiscretions, subjected to an administrative investigation, and dismissed by private respondent
institute on September 1, 1996 for gross negligence and loss of trust and confidence.11

Petitioner contends that her travails started on July 2, 1996 - when private respondent Mendoza and
the members of the Executive Committee (EXCOM) discussed the participation of DBR Prints and
Labor II – 1
General Services (DBR) as a bidder for the printing of Part I of the Philippine Electrical Code (Code).
Private respondent Calado, a member of the EXCOM, questioned DBR's participation in the bidding.
According to Calado, DBR was prohibited to bid in all the printing jobs of respondent institute due to
the alleged live-in relationship of its owner, Diosdado del Rosario (del Rosario), with Dela Torre,
petitioner's immediate subordinate.

Petitioner, who was present in the EXCOM Meeting as Executive Secretary, clarified that there was no
official order banning DBR from bidding and the award of printing jobs to the latter was approved by
the Board of Directors, the EXCOM and/or the Committee Head. She attached purchase orders as
proof of such approval. She also explained that the live-in relationship of del Rosario and Dela Torre
was known to the public and did not affect the efficiency of Dela Torre and the quality of service of
DBR to private respondent institute.

Petitioner states that she again earned the ire of private respondents when she gave an unsolicited
advice to the members of the EXCOM during a Committee Meeting. The EXCOM had allegedly decided
to demote Dela Torre, her immediate subordinate, from her position as Administrative Secretary to a
Clerk. Petitioner commented that it would be illegal to demote an employee.

On July 30, 1996, a stranger arrived at the IIEE Head Office. He turned out to be a newly-hired
security guard. After an hour, private respondent Mendoza gave petitioner a notice of thirty-day
suspension effective immediately.12 Private respondent Mendoza also ordered her to surrender the
keys to the vault, drawer, cabinet and petty cash. An on-the-spot accounting of the contents of the
vault was conducted. Finally, upon private respondent Mendoza's order, the newly-hired security
guard thoroughly checked her bag before she left the premises.

On July 31, 1996, petitioner submitted a written explanation13 denying her involvement in the
imputed charges. On August 6, 1996, Mendoza again wrote petitioner for the return of all office files,
properties and diskettes still in her possession. On August 12, 1996, petitioner received two (2) more
letters from private respondents: one for the turn-over of office properties;14 the other for her
attendance in an administrative investigation.15 She was given the option to bring one (1)
representative. Petitioner claims that the supposed investigation turned out to be an interrogation
designed to elicit information to be used against her.

On August 31, 1996, after the expiration of her thirty-day suspension, petitioner called up private
respondent Mendoza to ask when she could go back to work. The latter told her that she could not
report for work anymore and advised her to wait for a call. On the same day, a Memo16 was issued to
petitioner dismissing her effective September 1, 1996 on the ground of gross negligence and loss of
trust and confidence.

Private respondents tell another tale. They insist that petitioner was dismissed for cause.

On the latter part of 1995, private respondent Calado, then National Treasurer, noticed that one
company, DBR, had been consistently awarded majority of the printing contracts of respondent
institute. He relayed this observation to the incoming national officers for 1996 - herein private
respondents.

On June 27, 1996, during the bidding for the printing of Part I of the Code, the Board of Directors
declared a bidding failure due to violation of bidding procedures. Though DBR turned out to be the
lowest bidder, its bid was allegedly received after the lapse of the period of submission of bids and on
the same day the bids were opened. Further, it was allegedly not opened in the presence of the
Committee Members and the National Secretary.17 This triggered a company-wide audit of all printing
transactions in the previous years. The audit revealed two major irregularities: the printing
requirements of respondent institute were overpriced at 20%-100% for the years 1994-1996;18 and,

Labor II – 1
the printing jobs were consistently awarded to DBR despite the lack of necessary bidding
requirements.19 Petitioner was preventively suspended pending investigation of the charges.

The administrative investigation of petitioner allegedly yielded the following findings:20

1. [Petitioner] repeatedly denied having [any] knowledge as to [a] board policy requiring a canvass
of at least three companies for the printing requirements or for requirements over P10,000.00;

2. [She] denied knowledge if the memo she issued dated 12 March 1996 was being followed by her
subordinates;

3. She has no knowledge of the By-Laws of the Institute (regarding mailing of ballots); and,

4. She admits that she does not conduct canvass of the printing requirements being handled by
her.21

After the summary hearing, the Board of Directors deliberated and found justifiable cause to dismiss
petitioner and Dela Torre. Private respondents conducted further investigations after the dismissals
and allegedly uncovered more serious anomalies.

On November 12, 1999, Labor Arbiter Donato G. Quinto, Jr. ruled that petitioner's dismissal was
illegal and ordered, viz.:

WHEREFORE, premises above considered, the dismissal of complainant Marilyn Sagum is hereby
declared illegal. Since the reinstatement would not bring harmony between complainant and
respondent[,] Institute of Integrated Electrical Engineers of the Philippines, Inc. is ordered to pay
complainant separation pay of P195,168.00 plus backwages for one (1) year in the amount
of P146,376.00 plus attorney's fees equivalent to ten percent (10[%]) of the money award, all in the
aggregate of three hundred seventy[-]five thousand six hundred ninety[-]eight pesos and 40/100
centavos ([P]375,698.40).22

Petitioner filed a Partial Appeal23 with the NLRC for reinstatement and the payment of full backwages.
She argued that the decision of the Labor Arbiter did not show a case of irretrievable estrangement
between her and private respondents as to preclude her reinstatement. She also questioned the
denial of her claim for damages.24 Private respondents, on the other hand, moved for a reversal of
the decision and the dismissal of the case.25

The NLRC reversed the decision of the Labor Arbiter and ruled, viz.:

Logically, the issues raised by complainant in its (sic) partial appeal becomes (sic) moot and

academic. As reinstatement has no place for an employee validly dismissed - neither can damages be
a necessary consequence thereof.

ACCORDINGLY, premises considered, the decision appealed from is hereby reversed and set aside
and a new [one] entered dismissing [the] case for want of merits.26

Petitioner's motion for reconsideration was denied for lack of merit. She filed a Petition for Review
with the Court of Appeals.

The Court of Appeals found the decision of the Labor Arbiter to be more conformable with the
evidence and the law and granted the petition. It ruled, viz.:

Labor II – 1
WHEREFORE, premises considered, the decision of the NLRC is hereby annulled and SET ASIDE. The
Decision of the Labor Arbiter dated November 12, 1999 is affirmed with the MODIFICATION that the
petitioner shall be awarded full backwages.27

Respondent court ratiocinates its order on the payment of separation pay in lieu of petitioner's
reinstatement, viz.:

Considering that the dismissal was without basis, reinstatement with payment of backwages is in
order. However, due to the strained relations which would not bring harmony between the parties
brought about by the litigation and private respondents' consistent stand that there was a just cause
for petitioner Sagum's dismissal for loss of trust and confidence and gross negligence, we find that
separation pay should be awarded as an alternative to reinstatement.28

In a Motion for Partial Reconsideration, petitioner argued that the appellate court's denial of her
reinstatement and claim for damages despite its finding of illegal dismissal violates the Labor Code.
Respondent court denied the Motion for lack of merit.29

Petitioner raises the same issue in this petition, viz.:

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN CONTRADICTING THE

EXPRESS MANDATE OF ARTICLE 279 OF THE LABOR CODE; x x x

THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN ITS FACTUAL FINDING OF
STRAINED RELATIONS WITHOUT CITING ANY SPECIFIC EVIDENCE ON WHICH THE SAME IS BASED
CONTRADICTING THE APPLICABLE JURISPRUDENCE DECIDED BY THIS HONORABLE SUPREME
COURT.30

We find for the petitioner on the issue of reinstatement.

Article 279 of the Labor Code provides the law on reinstatement, viz.:

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

Corollarily, the Omnibus Rules Implementing the Labor Code state, viz.:

Section 2. Security of Tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause as provided in the Labor Code or when authorized by
existing laws.

Sec. 3. Reinstatement. An employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and to backwages.31

The existence of strained relations is a factual finding and should be initially raised, argued and
proven before the Labor Arbiter.32 Petitioner is correct that the finding of strained relations does not
have any basis on the records. Indeed, nowhere was the issue raised in private respondents'
pleadings before the Labor Arbiter and the NLRC. Sieving through the records, private respondents
first raised the issue in their Comment to Petitioner's Motion for Partial Reconsideration before the
Court of Appeals.33 In Globe-Mackay Cable and Radio Corporation v. NLRC,34 we emphasized
that the principle of strained relations cannot be applied indiscriminately. Otherwise, an illegally
Labor II – 1
dismissed employee can never be reinstated because invariably, some hostility is engendered
between litigants. As a rule, no strained relations should arise from a valid and legal act of asserting
one's right; otherwise, an employee who asserts 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.35

We reiterated the rule in Quijano v. Mercury Drug Corporation, viz.:

[A]n illegally dismissed employee is entitled to reinstatement as a matter of right. Over the years,
however, the case law developed that where reinstatement is not feasible, expedient or practical, as
where reinstatement would only exacerbate the tension and strained relations between the parties,
or where the relationship between the employer and [the] employee has been unduly strained by
reason of their irreconcilable differences, particularly where the illegally dismissed employee held a
managerial or key position in the company, it would be more prudent to order payment of separation
pay instead of reinstatement. Some unscrupulous employers, however, have taken advantage of the
overgrowth of this doctrine of "strained relations" by using it as a cover to get rid of its employees
and thus defeat their right to job security.

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.

xxx

[T]he alleged antagonism between the petitioner and the private respondent is a mere conclusion
bereft of evidentiary support. To be sure, the private respondent did not raise the defense of strained
relationship with the petitioner before the labor arbiter. Consequently, this issue which is factual in
nature, was not the subject of evidence on the part of both the petitioner and the respondent. There
is thus no competent evidence upon which to base the conclusion that the relationship between the
petitioner and the respondent has reached the point where it is now best to sever their employment
relationship. We therefore hold that the NLRC's ruling on the alleged brewing antagonism between
the petitioner and the respondent is a mere guesswork and cannot justify the non-reinstatement of
petitioner x x x.36 (footnotes and emphases omitted)  chanroblesvirtuallawlibrary

In the case at bar, there are no hard facts upon which to base the application of the doctrine of
strained relationship. Petitioner is correct that mere persistency in argument does not amount to
proof,37 and to deny an employee's right to be reinstated on the basis of the mere consistency of the
employer's stand that the dismissal was for cause is to make a mockery of the right of reinstatement
under Article 279 of the Labor Code.

Be that as it may, we reject petitioner's claim for moral and exemplary damages. The award of moral
and exemplary damages is proper when an illegally dismissed employee had been harassed and
arbitrarily terminated by the employer, as when the latter committed an anti-social and oppressive
abuse of its right to investigate and dismiss an employee. The person claiming moral damages must
prove the existence of bad faith by clear and convincing evidence for the law always presumes good
faith. It is not enough that one merely suffered sleepless nights, mental anguish or serious anxiety as
the result of the actuations of the other party.38

In the case at bar, we are not convinced that private respondents acted in a wanton or oppressive
manner. The measures undertaken were relevant to the company-wide audit and investigation
conducted within the institute. The suspension of petitioner without prior investigation is akin to
preventive suspension which was necessary pending investigation of company records which she had
access to. Nor can the posting of security guards inside the petitioner's room while the on-the-spot

Labor II – 1
accounting was being conducted and the inspection of her bag and personal effects in the presence of
her subordinates be characterized as oppressive. Despite the presence of security guards, petitioner
did not even allege that there was use of force, abusive language or any species of violence. Lastly,
we do not find the articles published in private respondent institute's publication, The Electrical
Engineer, to be malicious as they were fact-based.

IN VIEW WHEREOF, the assailed Decision and the Resolution of the Court of Appeals in CA-G.R. SP
No. 68790 dated June 28, 2002 and April 2, 2003, respectively, are AFFIRMED with the
MODIFICATION that petitioner Marilyn T. Sagum is entitled to REINSTATEMENT. Private respondents
are ORDERED to immediately reinstate petitioner to her previous position without loss of seniority
rights. In case the former position of petitioner is no longer available, private respondent institute is
directed to create an equivalent position and immediately reinstate petitioner without loss of seniority
rights.

Labor II – 1
70.) G.R. No. 158693             November 17, 2004

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE
ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision of the Court of Appeals dated January 23, 2003, in CA-G.R.
1 

SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No.
023442-00.

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

Petitioners then filed a complaint for illegal dismissal and payment of money claims and on December 28, 1999, the
3 

Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the
monetary claims. The dispositive portion of the decision states:

WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly,
respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of:

1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93

and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from
date of hiring up to November 29, 1999.

Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for
the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio
Agabon's 13th month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00)
Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED
SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY
THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio
Agabon, as per attached computation of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR.

SO ORDERED. 4

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work,
and were not entitled to backwages and separation pay. The other money claims awarded by the Labor Arbiter were
also denied for lack of evidence. 5

Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals.
Labor II – 1
The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned
their employment but ordered the payment of money claims. The dispositive portion of the decision reads:

WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it
dismissed petitioner's money claims. Private respondents are ordered to pay petitioners holiday pay for four
(4) regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said years, and
to pay the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the amount of P2,150.00.

SO ORDERED. 6

Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed. 7

Petitioners assert that they were dismissed because the private respondent refused to give them assignments
unless they agreed to work on a "pakyaw" basis when they reported for duty on February 23, 1999. They did not
agree on this arrangement because it would mean losing benefits as Social Security System (SSS) members.
Petitioners also claim that private respondent did not comply with the twin requirements of notice and hearing. 8

Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their
work. In fact, private respondent sent two letters to the last known addresses of the petitioners advising them to
9 

report for work. Private respondent's manager even talked to petitioner Virgilio Agabon by telephone sometime in
June 1999 to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice
installation work. However, petitioners did not report for work because they had subcontracted to perform installation
work for another company. Petitioners also demanded for an increase in their wage to P280.00 per day. When this
was not granted, petitioners stopped reporting for work and filed the illegal dismissal case. 10

It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but even
finality if the findings are supported by substantial evidence. This is especially so when such findings were affirmed
by the Court of Appeals. However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this
11 

case, the reviewing court may delve into the records and examine for itself the questioned findings. 12

Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal was for a just
cause. They had abandoned their employment and were already working for another employer.

To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the
employer to give the employee the opportunity to be heard and to defend himself. Article 282 of the Labor Code
13 

enumerates the just causes for termination by the employer: (a) serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or the latter's representative in connection with the employee's work;
(b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the employee of the trust
reposed in him by his employer or his duly authorized representative; (d) commission of a crime or offense by the
employee against the person of his employer or any immediate member of his family or his duly authorized
representative; and (e) other causes analogous to the foregoing.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment. It is a form of
14 

neglect of duty, hence, a just cause for termination of employment by the employer. For a valid finding of
15 

abandonment, these two factors should be present: (1) the failure to report for work or absence without valid or
justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the more
determinative factor which is manifested by overt acts from which it may be deduced that the employees has no
more intention to work. The intent to discontinue the employment must be shown by clear proof that it was
deliberate and unjustified. 16

In February 1999, petitioners were frequently absent having subcontracted for an installation work for another
company. Subcontracting for another company clearly showed the intention to sever the employer-employee
relationship with private respondent. This was not the first time they did this. In January 1996, they did not report for
work because they were working for another company. Private respondent at that time warned petitioners that they
would be dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear intention to

Labor II – 1
sever their employer-employee relationship. The record of an employee is a relevant consideration in determining
the penalty that should be meted out to him. 17

In Sandoval Shipyard v. Clave, we held that an employee who deliberately absented from work without leave or
18 

permission from his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his
job. We should apply that rule with more reason here where petitioners were absent because they were already
working in another company.

The law imposes many obligations on the employer such as providing just compensation to workers, observance of
the procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also
recognizes the right of the employer to expect from its workers not only good performance, adequate work and
diligence, but also good conduct and loyalty. The employer may not be compelled to continue to employ such
19 

persons whose continuance in the service will patently be inimical to his interests.20

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

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

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

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

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

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

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

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

Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals based
on authorized causes involve grounds under the Labor Code which allow the employer to terminate employees. A
termination for an authorized cause requires payment of separation pay. When the termination of employment is
declared illegal, reinstatement and full backwages are mandated under Article 279. If reinstatement is no longer
possible where the dismissal was unjust, separation pay may be granted.

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

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

Labor II – 1
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.

In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is
entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid
up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not
invalidate the dismissal. However, the employer should be held liable for non-compliance with the procedural
requirements of due process.

The present case squarely falls under the fourth situation. The dismissal should be upheld because it was
established that the petitioners abandoned their jobs to work for another company. Private respondent, however, did
not follow the notice requirements and instead argued that sending notices to the last known addresses would have
been useless because they did not reside there anymore. Unfortunately for the private respondent, this is not a valid
excuse because the law mandates the twin notice requirements to the employee's last known address. Thus, it 21 

should be held liable for non-compliance with the procedural requirements of due process.

A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings on
employment termination in the light of Serrano v. National Labor Relations Commission. 22

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the
1989 case of Wenphil Corp. v. National Labor Relations Commission, we reversed this long-standing rule and held
23 

that the dismissed employee, although not given any notice and hearing, was not entitled to reinstatement and
backwages because the dismissal was for grave misconduct and insubordination, a just ground for termination
under Article 282. The employee had a violent temper and caused trouble during office hours, defying superiors who
tried to pacify him. We concluded that reinstating the employee and awarding backwages "may encourage him to do
even worse and will render a mockery of the rules of discipline that employees are required to observe." We further
24 

held that:

Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He
has no right to return to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to private respondent his
right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal
of an employee must be for just or authorized cause and after due process. Petitioner committed an
infraction of the second requirement. Thus, it must be imposed a sanction for its failure to give a formal
notice and conduct an investigation as required by law before dismissing petitioner from employment.
Considering the circumstances of this case petitioner must indemnify the private respondent the amount of
P1,000.00. The measure of this award depends on the facts of each case and the gravity of the omission
committed by the employer. 25

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due
process requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the
employee. This became known as the Wenphil or Belated Due Process Rule.

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We 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. We concluded that the imposition of penalty by way of damages for
violation of the notice requirement was not serving as a deterrent. Hence, we now 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.

Labor II – 1
Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code
which states:

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

This means that 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.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based
on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to
a civilized society as conceived by our entire history. Due process is that which comports with the deepest notions of
what is fair and right and just. It is a constitutional restraint on the legislative as well as on the executive and judicial
26 

powers of the government provided by the Bill of Rights.

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 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
27 

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
28 

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,
29 

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.

Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations
Commission, which opinion he reiterated in Serrano, stated:
30 

C. Where there is just cause for dismissal but due process has not been properly observed by an employer,
it would not be right to order either the reinstatement of the dismissed employee or the payment of
backwages to him. In failing, however, to comply with the procedure prescribed by law in terminating the
services of the employee, the employer must be deemed to have opted or, in any case, should be made
liable, for the payment of separation pay. It might be pointed out that the notice to be given and the hearing
to be conducted generally constitute the two-part due process requirement of law to be accorded to the
employee by the employer. Nevertheless, peculiar circumstances might obtain in certain situations where to

Labor II – 1
 undertake the above steps would be no more than a useless formality and where, accordingly, it would not
be imprudent to apply the res ipsa loquitur rule and award, in lieu of separation pay, nominal damages to the
employee. x x x. 31

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.

This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by
invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but
a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught
stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or
where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal
would not serve public interest. It could also discourage investments that can generate employment in the local
economy.

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
32 

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. 33

It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if
the requirements of due process were complied with, would undoubtedly result in a valid dismissal.

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." 34

This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases.
Social justice is not based on rigid formulas set in stone. It has to allow for changing times and circumstances.

Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management relations and
dispense justice with an even hand in every case:

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. 35

Labor II – 1
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
36 

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. 37

As enunciated by this Court in Viernes v. National Labor Relations Commissions, an employer is liable to pay
38 

indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such dismissal,
the employer fails to comply with the requirements of due process. The Court, after considering the circumstances
therein, fixed the indemnity at P2,590.50, which was equivalent to the employee's one month salary. This indemnity
is intended not to penalize the employer but to vindicate or recognize the employee's right to statutory due process
which was violated by the employer. 39

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. Considering the prevailing circumstances in the case at bar,
40 

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.

Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners' holiday pay,
service incentive leave pay and 13th month pay.

We are not persuaded.

We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for petitioners'
holiday pay, service incentive leave pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege
non-payment, the general rule is that the burden rests on the employer to prove payment, rather than on the
employee to prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records,
remittances and other similar documents – which will show that overtime, differentials, service incentive leave and
other claims of workers have been paid – are not in the possession of the worker but in the custody and absolute
control of the employer.41

In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave pay, it could
have easily presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it
did not, except with respect to the 13th month pay wherein it presented cash vouchers showing payments of the
benefit in the years disputed. Allegations by private respondent that it does not operate during holidays and that it
42 

allows its employees 10 days leave with pay, other than being self-serving, do not constitute proof of payment.
Consequently, it failed to discharge the onus probandi thereby making it liable for such claims to the petitioners.

Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay, we
find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional
income in the form of the 13th month pay to employees not already receiving the same so as "to further protect the
43 

Labor II – 1
level of real wages from the ravages of world-wide inflation." Clearly, as additional income, the 13th month pay is
44 

included in the definition of wage under Article 97(f) of the Labor Code, to wit:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money whether fixed or ascertained on a time, task, piece , or commission
basis, or other method of calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for services rendered or to be
rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the employee…"

from which an employer is prohibited under Article 113 of the same Code from making any deductions without the
45 

employee's knowledge and consent. In the instant case, private respondent failed to show that the deduction of the
SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay was authorized by the latter.
The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as
one of his money claims against private respondent.

The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the private
respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of
P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio
Agabon's thirteenth month pay for 1998 in the amount of P2,150.00.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated January
23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and Virgilio Agabon abandoned their work, and
ordering private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in
the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the
balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 is AFFIRMED with
the MODIFICATION that private respondent Riviera Home Improvements, Inc. is further ORDERED to pay each of
the petitioners the amount of P30,000.00 as nominal damages for non-compliance with statutory due process.

Labor II – 1
 71.) [G.R. NO. 151378. March 28, 2005]

JAKA FOOD PROCESSING CORPORATION, Petitioners, v. DARWIN PACOT, ROBERT

PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL LESCANO and JONATHAN
CAGABCAB, Respondents.

DECISION

GARCIA, J.:

Assailed and sought to be set aside in this appeal by way of a Petition for Review on Certiorari under
rule 45 of the Rules of Court are the following issuances of the Court of Appeals in CA-G.R. SP. No.
59847, to wit:

1. Decision dated 16 November 2001,1 reversing and setting aside an earlier decision of the
National Labor Relations Commission (NLRC); and

2. Resolution dated 8 January 2002,2 denying petitioner's motion for reconsideration.

The material facts may be briefly stated, as follows:

Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and
Jonathan Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA, for
short) until the latter terminated their employment on August 29, 1997 because the corporation was
"in dire financial straits". It is not disputed, however, that the termination was effected without JAKA
complying with the requirement under Article 283 of the Labor Code regarding the service of a
written notice upon the employees and the Department of Labor and Employment at least one (1)
month before the intended date of termination.

In time, respondents separately filed with the regional Arbitration Branch of the National Labor
Relations Commission (NLRC) complaints for illegal dismissal, underpayment of wages and
nonpayment of service incentive leave and 13th month pay against JAKA and its HRD Manager,
Rosana Castelo.

After due proceedings, the Labor Arbiter rendered a decision3 declaring the termination illegal and
ordering JAKA and its HRD Manager to reinstate respondents with full backwages, and separation pay
if reinstatement is not possible. More specifically the decision dispositively reads:

WHEREFORE, judgment is hereby rendered declaring as illegal the termination of complainants and
ordering respondents to reinstate them to their positions with full backwages which as of July 30,
1998 have already amounted to P339,768.00. Respondents are also ordered to pay complainants the
amount of P2,775.00 representing the unpaid service incentive leave pay of Parohinog, Lescano and
Cagabcab an the amount of P19,239.96 as payment for 1997 13th month pay as alluded in the above
computation.

If complainants could not be reinstated, respondents are ordered to pay them separation pay
equivalent to one month salary for very (sic) year of service.

SO ORDERED.

Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30,
1999,4 affirmed in toto that of the Labor Arbiter.

Labor II – 1
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another decision
dated January 28, 2000,5 this time modifying its earlier decision, thus:

WHEREFORE, premises considered, the instant motion for reconsideration is hereby GRANTED and
the challenged decision of this Commission [dated] 30 August 1999 and the decision of the Labor
Arbiter xxx are hereby modified by reversing an setting aside the awards of backwages, service
incentive leave pay. Each of the complainants-appellees shall be entitled to a separation pay
equivalent to one month. In addition, respondents-appellants is (sic) ordered to pay each of the
complainants-appellees the sum of P2,000.00 as indemnification for its failure to observe due process
in effecting the retrenchment.

SO ORDERED.

Their motion for reconsideration having been denied by the NLRC in its resolution of April 28,
2000,6 respondents went to the Court of Appeals via a petition for certiorari , thereat docketed as
CA-G.R. SP No. 59847.

As stated at the outset hereof, the Court of Appeals, in a decision dated November 16, 2000,
applying the doctrine laid down by this Court in Serrano v. NLRC,7 reversed and set aside the NLRC's
decision of January 28, 2000, thus:

WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations Commission
is REVERSED and SET ASIDE and another one entered ordering respondent JAKA Foods Processing
Corporation to pay petitioners separation pay equivalent to one (1) month salary, the proportionate
13th month pay and, in addition, full backwages from the time their employment was terminated on
August 29, 1997 up to the time the Decision herein becomes final.

SO ORDERED.

This time, JAKA moved for a reconsideration but its motion was denied by the appellate court in its
resolution of January 8, 2002.

Hence, JAKA's present recourse, submitting, for our consideration, the following issues:

"I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED 'FULL BACKWAGES' TO
RESPONDENTS.

II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY TO
RESPONDENTS".

As we see it, there is only one question that requires resolution, i.e. what are the legal
implications of a situation where an employee is dismissed for cause but such dismissal
was effected without the employer's compliance with the notice requirement under the
Labor Code.

This, certainly, is not a case of first impression. In the very recent case of Agabon v. NLRC,8 we had
the opportunity to resolve a similar question. Therein, we found that the employees committed a
grave offense, i.e.,  abandonment, which is a form of a neglect of duty which, in turn, is one of the
just causes enumerated under Article 282 of the Labor Code. In said case, we upheld the validity of
the dismissal despite non-compliance with the notice requirement of the Labor Code. However, we
required the employer to pay the dismissed employees the amount of P30,000.00, representing
nominal damages for non-compliance with statutory due process, thus:

Labor II – 1
"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.

xxx

The violation of 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. 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,"
(Emphasis supplied).

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.

At this point, we note that there are divergent implications of a dismissal for just cause under Article
282, on one hand, and a dismissal for authorized cause under Article 283, on the other.

A dismissal for just cause under Article 282 implies that the employee concerned has committed, or
is guilty of, some violation against the employer, i.e. the employee has committed some serious
misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his
duties. Thus, it can be said that the employee himself initiated the dismissal process.

On another breath, a dismissal for an authorized cause under Article 283 does not necessarily
imply delinquency or culpability on the part of the employee. Instead, the dismissal process is
initiated by the employer's exercise of his management prerogative, i.e. when the employer opts to
install labor saving devices, when he decides to cease business operations or when, as in this case,
he undertakes to implement a retrenchment program.

The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal for
authorized cause under Article 283 is further reinforced by the fact that in the first, payment of
separation pay, as a rule, is not required, while in the second, the law requires payment of
separation pay.9

For these reasons, there ought to be a difference in treatment when the ground for dismissal is one
of the just causes under Article 282, and when based on one of the authorized causes under Article
283.

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but
the employer failed to comply with the notice requirement, the sanction to be imposed upon him
should be tempered because the dismissal process was, in effect, initiated by an act imputable to the
employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the
employer failed to comply with the notice requirement, the sanction should be stiffer because the
dismissal process was initiated by the employer's exercise of his management prerogative.

Labor II – 1
The records before us reveal that, indeed, JAKA was suffering from serious business losses at the
time it terminated respondents' employment. As aptly found by the NLRC:

"A careful study of the evidence presented by the respondent-appellant corporation shows that the
audited Financial Statement of the corporation for the periods 1996, 1997 and 1998 were submitted
by the respondent-appellant corporation, The Statement of Income and Deficit found in the Audited
Financial Statement of the respondent-appellant corporation clearly shows the following in 1996, the
deficit of the respondent-appellant corporation was P188,218,419.00 or 94.11% of the stockholder's
[sic] equity which amounts to P200,000,000.00. In 1997 when the retrenchment program of
respondent-appellant corporation was undertaken, the deficit ballooned to P247,222,569.00 or
123.61% of the stockholders' equity, thus a capital deficiency or impairment of equity ensued. In
1998, the deficit grew to P355,794,897.00 or 177% of the stockholders' equity. From 1996 to 1997,
the deficit grew by more that (sic) 31% while in 1998 the deficit grew by more than 47%.

The Statement of Income and Deficit of the respondent-appellant corporation to prove its alleged
losses was prepared by an independent auditor, SGV & Co. It convincingly showed that the
respondent-appellant corporation was in dire financial straits, which the complainants-appellees failed
to dispute. The losses incurred by the respondent-appellant corporation are clearly substantial and
sufficiently proven with clear and satisfactory evidence. Losses incurred were adequately shown with
respondent-appellant's audited financial statement. Having established the loss incurred by the
respondent-appellant corporation, it necessarily necessarily (sic) follows that the ground in support of
retrenchment existed at the time the complainants-appellees were terminated. We cannot therefore
sustain the findings of the Labor Arbiter that the alleged losses of the respondent-appellant was [sic]
not well substantiated by substantial proofs. It is therefore logical for the corporation to implement a
retrenchment program to prevent further losses."10

Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing finding of
the NLRC which, incidentally, was also affirmed by the Court of Appeals.

It is, therefore, established that there was ground for respondents' dismissal, i.e., retrenchment,
which is one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is
established that JAKA failed to comply with the notice requirement under the same Article.
Considering the factual circumstances in the instant case and the above ratiocination, we, therefore,
deem it proper to fix the indemnity at P50,000.00.

We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay respondents
separation pay equivalent to one (1) month salary for every year of service. This is because in Reahs
Corporation v. NLRC,11 we made the following declaration:

"The rule, therefore, is that in all cases of business closure or cessation of operation or undertaking
of the employer, the affected employee is entitled to separation pay. This is consistent with the state
policy of treating labor as a primary social economic force, affording full protection to its rights as
well as its welfare. The exception is when the closure of business or cessation of operations
is due to serious business losses or financial reverses; duly proved, in which case, the
right of affected employees to separation pay is lost for obvious reasons. xxx". (Emphasis
supplied) ςrαlαωlιbrαrÿ

WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of
the Court of Appeals respectively dated November 16, 2001 and January 8, 2002 are hereby SET
ASIDE and a new one entered upholding the legality of the dismissal but ordering petitioner to pay
each of the respondents the amount of P50,000.00, representing nominal damages for non-
compliance with statutory due process.

Labor II – 1
72.) G.R. No. 164518             March 30, 2006

INDUSTRIAL TIMBER CORPORATION, INDUSTRIAL PLYWOOD GROUP CORPORATION, TOMAS

TANGSOC, JR., LORENZO TANGSOC and TOMAS TAN, Petitioners,
vs.
VIRGILIO ABABON, IGNACIO ABACAJEN, ANGELINA ABAY-ABAY, EDITH ABREA, SAMUEL ABREA,
BIENVENIDO ACILO, RODRIGO ACILO, VICTOR ACILO, ARTURO ADVINCULA, GERTRUDES AMPARO,
VIRGILIO ANTONIO, MILA ARQUITA, PRUDENCIO ARQUITA, ALBERT ATON, WARLITA AUTIDA, ALICIA
AWITAN, LEOPOLDO AYATON, ARTURO BALBOTEN, DANILO BANATE, LOLITA BATAN, RAMIL BUTALON,
CARMILITA CAINGLES, VICENTE CAHARIAN, BENEDICTA CAJIPE, FELIPE CALLANO, ALFREDO CARILLO,
NILA CARILLO, ALGER CORBETA, GREGORIO DABALOS, TERESITA DABALOS, VENERANDO DALAUTA,
RICARDO DANGCULOS, MONTANO DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO, EDITHA DUMANON,
ALFREDO FAELNAR, RAUL FORTUN, MAXIMO GALLA, ANGELES GALUPO, PERFECTO GAMBE,
VERGINITA GANGCA, RUPERTO GORGONIO, ROMEO HERRERO, SERGIO HORO-HORO, FRANCISCO
IBARRA, ABRAHAM JALE, DANDY LABITAD, ANTONINA LAMBANG, ERNESTO LAUSA, VICTORIA LOOD,
NEMESIO LOPE, JR., ESCARLITO MADLOS, MARCOS MAKINANO, REMEGIO MAKINANO, VICENTE
MAKINANO, REYNALDO MASUHAY, HELEN MARATAS, ELIZABETH MENDOZA, GUILBERTA MONTEROSO,
GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO NUÑEZ, JR., ELISEO ORONGAN, ARMANDO OROPA,
ASUNCION OROPA, JOSE EDWIN OROPA, BALDEMAR PAGALAN, BARTOLOME PAGALAN, DAMASO
PALOMA, MANALO PLAZA, JEREMIAS PELAEZ, FRANCISCO PICARDAL, HERMINIA PUBLICO, ROMULO
QUINTOS, FIDEL QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN CILDRIC RODRIGUEZ, SAMUEL
SAROMINES, NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL TAGUPA, VICTOR TAGUPA, BRIGIDA
TABANAO, PEDRO TABANAO, ROBERTO TABANAO, MARIA TAN, RONNIE TAN, TOLENTINO TEE,
ROGELIO TAMADA, MINDA TUMAOB and ROBERTO TUTOR, Respondents.

x----------------x

G.R. No. 164965             March 30, 2006

VIRGILIO ABABON, IGNACIO ABACAJEN, ANGELINA ABAY-ABAY, EDITH ABREA, SAMUEL ABREA,
BIENVENIDO ACILO, RODRIGO ACILO, VICTOR ACILO, ARTURO ADVINCULA, GERTRUDES AMPARO,
MILA ARQUITA, VIRGILIO ANTONIO, PRUDENCIO ARQUITA, ALBERT ATON, WARLITA AUDITA, ALICIA
AWITAN, LEOPOLDO AYATON, ARTURO BALBOTEN, DANILO BANATE, LOLITA BATAN, RAMIL BUTALON,
CARMELITA CAINGLES, VICENTE CAHARIAN, BENEDICTA CAJIPE, FELIPE CALLANO, ALFREDO
CARILLO, NILA CARILLO, ALGIER CORBETA, GREGORIO DABALOS, TERESITA DABALOS, VENERANDO
DALAUTA, RICARDO DANGCULOS, MONTANO DAPROSA, LUISITO DIAZ, FELIZARDO DUMULAO, EDITHA
DUMANON, ALFREDO FAELNAR, RAUL FORTUN, MAXIMO GALLA, ANGELES GALUPO, PERFECTO
GAMBE, VIRGINITA GANGCA, RUPERTO GORGONIO, ROMEO HERRERO, SERGIO HOR-HORO,
FRANCISCO IBARRA, ABRAHAM JALE, DANDY LABITAD, ANTONINA LAMBANG, ERNESTO LAUSA,
VICTORIA LOOD, NEMESIO LOPE, JR., ESCARLITO MADLOS, MARCOS MAKINANO, REMEGIO MAKINANO,
VICENTE MAKINANO, REYNALDO MAHUSAY, HELEN MARATAS, ELIZABETH MENDOZA, GUILBERTA
MONTEROSO, GILDA NAVALTA, PILAR NAVARRO, SIMPORIANO NUÑEZ, JR., ELISEO ORONGAN,
ARMANDO OROPA, ASUNCION OROPA, JOSE EDWIN OROPA, BALDEMAR PAGALAN, BARTOLOME
PAGALAN, DAMASO PALOMA, MANALO PLAZA, JEREMIAS PELAEZ, FRANCISCO PICARDAL, HERMINIA
PUBLICO, ROMULO QUINTOS, FIDEL QUITA, FELICIANO RANADA, RODOLFO RARU, LEAN CILDRIC
RODRIGUEZ, SAMUEL SAROMINES, NATIVIDAD SIGNAR, CHERRIE SON, SAMUEL TAGUPA, VICTOR
TAGUPA, BRIGIDA TABANAO, PEDRO TABANAO, ROBERTO TABANAO, MARIA TAN, RONNIE TAN,
TOLENTINO TEE, ROGELIO TAMADA, MINDA TUMAOB, and ROBERTO TUTOR, Petitioners,
vs.
THE HONORABLE COURT OF APPEALS, INDUSTRIAL TIMBER CORPORATION, INDUSTRIAL PLYWOOD
GROUP CORPORATION, TOMAS TANGSOC, JR., LORENZO TANGSOC and TOMAS TAN, Respondents.

RESOLUTION

YNARES-SANTIAGO, J.:

Labor II – 1
On January 25, 2006, the Court rendered judgment disposing of the case as follows:

WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of Appeals in CA-G.R. SP No.
51966, which set aside the May 24, 1995 Decision of the NLRC, as well as the July 16, 2004 Resolution denying
ITC’s motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision of the NLRC reinstating the
decision of the Labor Arbiter finding the closure or cessation of ITC’s business valid, is AFFIRMED with the
MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one month pay or at least one-half month
pay for every year of service, whichever is higher, and P50,000.00 as nominal damages to each employee.

SO ORDERED.1

On March 14, 2006, respondents in G.R. No. 164518 who are also petitioners in G.R. No. 164965 filed a Motion for
Reconsideration seeking to set aside the above-stated Decision and reinstate the October 21, 2002 Decision of the
Court of Appeals, with the modification that they be awarded full backwages, with the additional award of
P50,000.00 as nominal damages for each worker.

They insist that the holding in International Timber Corporation v. National Labor Relations Commission2 that the
closure of ITC’s Butuan Plant was valid should not have been applied in the instant cases which pertain to ITC’s
Stanply Plant. They further claim that the findings by the Labor Arbiter that there was a shortage of raw materials;
that the wood processing plaint permit has expired; that the lease contract with IPGC was terminated; and that ITC
and IPGC were not business conduits, were all debunked by the NLRC.

The arguments raised have been amply discussed; at any rate, they are inconsequential as to affect the assailed
Decision.

On the other hand, petitioners in G.R. No. 164518 who are also respondents in G.R. No. 164965 also filed a Motion
for Partial Reconsideration seeking to delete or reduce the nominal damages awarded to each employee,
considering that since August 17, 1990 it had ceased operation of its business and that the award involves a huge
amount considering that there are 97 workers.3

While we ruled in this case that the sanction should be stiffer in a dismissal based on authorized cause where the
employer failed to comply with the notice requirement than a dismissal based on just cause with the same
procedural infirmity, however, in instances where the execution of a decision becomes impossible, unjust, or too
burdensome, modification of the decision becomes necessary in order to harmonize the disposition with the
prevailing circumstances.

In the determination of the amount of nominal damages which is addressed to the sound discretion of the court,
several factors are taken into account: (1) the authorized cause invoked, whether it was a retrenchment or a closure
or cessation of operation of the establishment due to serious business losses or financial reverses or otherwise; (2)
the number of employees to be awarded; (3) the capacity of the employers to satisfy the awards, taken into account
their prevailing financial status as borne by the records; (4) the employer’s grant of other termination benefits in
favor of the employees; and (5) whether there was a bona fide attempt to comply with the notice requirements as
opposed to giving no notice at all.

In the case at bar, there was valid authorized cause considering the closure or cessation of ITC’s business which
was done in good faith and due to circumstances beyond ITC’s control. Moreover, ITC had ceased to generate any
income since its closure on August 17, 1990. Several months prior to the closure, ITC experienced diminished
income due to high production costs, erratic supply of raw materials, depressed prices, and poor market conditions
for its wood products. It appears that ITC had given its employees all benefits in accord with the CBA upon their
termination.

Thus, considering the circumstances obtaining in the case at bar, we deem it wise and just to reduce the amount of
nominal damages to be awarded for each employee to P10,000.00 each instead of P50,000.00 each.

WHEREFORE, premises considered, the Motion for Reconsideration of respondents in G.R. No. 164518 who are
also petitioners in G.R. No. 164965 is DENIED. The Motion for Partial Reconsideration of petitioners in G.R. No.

Labor II – 1
164518 who are also respondents in G.R. No. 164965 is GRANTED. The amount of nominal damages awarded to
each employee is reduced from P50,000.00 to P10,000.00.

Labor II – 1
73.) G.R. No. 173154               December 9, 2013

SANGWOO PHILIPPINES, INC. and/or SANG IK JANG, JISSO JANG, WISSO JANG and NORBERTO
TADEO, Petitioners,
vs.
SANGWOO PHILIPPINES, INC. EMPLOYEE UNION - OLALIA, represented by PORFERIA
SALIBONGCOGON, , Respondents.
1

x---------------x

G.R. No. 173229

SANGWOO PHILIPPINES, INC. EMPLOYEES UNION - OLALIA, represented by PORFERIA

SALIBONGCOGON, Petitioners,
vs.
SANGWOO PHILIPPINES, INC. and/or SANG IK JANG, JISSO JANG, WISSO JANG, and NOREBERTO
TADEO, Respondents.

DECISION

PERLAS-BERNABE, J.:

Before the Court are consolidated petitions for review on certiorari  assailing the Decision  dated January 12, 2006
2 3

and Resolution  dated June 14, 2006 of the Court of Appeals(CA)in CA-G.R. SP No. 88965 that set aside the
4

Resolutions  dated January 26, 2005 and March 31, 2005 of the National Labor Relations Commission(NLRC),
5

deleted the award of separation pay, and ordered the payment of financial assistance of ₱15,000.00 each to its
employees.

The Facts

On July 25, 2003, during the collective bargaining agreement (CBA) negotiations between Sangwoo Philippines,
Inc. Employees Union – Olalia (SPEU) and Sangwoo Philippines, Inc.(SPI), the latter filed with the Department of
Labor and Employment (DOLE) a letter-notice of temporary suspension of operations for one (1) month, beginning
September 15, 2003, due to lack of orders from its buyers.  SPEU was furnished a copy of the said letter.
7

Negotiations on the CBA, however, continued and on September 10, 2003, the parties signed a handwritten
Memorandum of Agreement, which, among others, specified the employees’ wages and benefits for the next two (2)
years, and that in the event of a temporary shutdown, all machineries and raw materials would not be taken out of
the SPI premises. 8

On September 15, 2003,SPI temporarily ceased operations. Thereafter, it successively filed two (2) letters  with the
9

DOLE, copy furnished SPEU, for the extension of the temporary shutdown until March 15, 2004.  Meanwhile, on
10

October 28, 2003, SPEU filed a complaint for unfair labor practice, illegal closure, illegal dismissal, damages and
attorney’s fees before the Regional Arbitration Branch IV of the NLRC.  Subsequently, or on February 12, 2004, SPI
11

posted, in conspicuous places within the company premises, notices of its permanent closure and cessation of
business operations, effective March 16, 2004, due to serious economic losses and financial reverses.  The DOLE
12

was furnished a copy of said notice on February 13, 2004, together with a separate letter notifying it of the
company’s permanent closure.  SPEU was also furnished with a copy of the notice of permanent closure. Forthwith,
13

SPI offered separation benefits of one-half (½) month pay for every year of service to each of its employees. 234
employees of SPI accepted the offer, received the said sums and executed quitclaims.  Those who refused the
14

offer, i.e., the minority employees, were nevertheless given until March 25, 2004 to accept their checks and
correspondingly, execute quitclaims. However, the minority employees did not claim the said checks.

The LA Ruling

Labor II – 1
In a Decision  dated June 4, 2004, the Labor Arbiter (LA) ruled in favor of SPI. The LA found that SPI was indeed
15

suffering from serious business losses–as evidenced by financial statements which were never contested by SPEU
–and, as such, validly discontinued its operations.  Consequently, the LA held that SPI was not guilty of unfair labor
16

practice, and similarly observed that it duly complied with the requirement of furnishing notices of closure to its
employees and the DOLE. Lastly, the LA ruled that since SPI’s closure of business was due to serious business
losses, it was not mandated by law to grant separation benefits to the minority employees.

Aggrieved, SPEU filed an Appeal Memorandum  before the NLRC.

17

The NLRC Ruling

In a Resolution  dated January 26, 2005, the NLRC sustained the ruling of the LA, albeit with modification. While it
18

upheld SPI’s closure due to serious business losses, it ruled that the members of SPEU are entitled to payment of
separation pay equivalent to one-half (½) month pay for every year of service. In this relation, the NLRC opined that
since SPI already gave separation benefits to 234 of its employees, the minority employees should not be denied of
the same. Dissatisfied, SPI filed a petition for certiorari  before the CA, praying for, inter alia, the issuance of a
19

temporary restraining order (TRO) and/or a writ of preliminary injunction against the execution of the aforesaid
NLRC resolution.

The CA Proceedings

In a Resolution  dated April 12, 2005, the CA issued a TRO, which enjoined the enforcement of the NLRC
20

resolution. Thereafter, in a Resolution  dated June 3, 2005, the CA issued a writ of preliminary injunction against the
21

same.

Meanwhile, pursuant to the CA’s Resolution  dated May 19, 2005 which suggested that the parties explore talks of a
22

possible compromise agreement, SPI sent a Formal Offer of Settlement  dated May 24, 2005 to SPEU, offering the
23

amount of ₱15,000.00 as financial assistance to each of the minority employees. On May 26, 2005, SPI sent a
Reiteration of Formal Offer of Settlement to SPEU, reasserting its previous offer of financial assistance. However,
settlement talks broke down as SPEU did not accept SPI’s offer.

In a Decision  dated January 12, 2006, the CA held that the minority employees were not entitled to separation pay
24

considering that the company’s closure was due to serious business losses. It pronounced that requiring an
employer to be generous when it was no longer in a position to be so would be oppressive and unjust.
Nevertheless, the CA still ordered SPI to pay the minority employees ₱15,000.00 each, representing the amount of
financial assistance as contained in the Formal Offer of Settlement.

Both parties filed motions for reconsideration which were, however, denied in a Resolution  dated June 14, 2006.
25

Hence, these petitions.

The Issues Before the Court

The issues for the Court’s resolution are as follows: (a) whether or not the minority employees are entitled
to separation pay; and (b) whether or not SPI complied with the notice requirement of Article 297 (formerly
Article 283)  of the Labor Code.
26

The Court’s Ruling

Both petitions are partly meritorious.

A. Non-entitlement to Separation Benefits.

Closure of business 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
27

employer who cannot pay anymore his employees since business has already stopped.  In such a case, the
28

Labor II – 1
employer is generally required to give separation benefits to its employees, unless the closure is due to serious
business losses.  As explained in the case of Galaxie Steel Workers Union (GSWU-NAFLU-KMU) v.
29

NLRC (Galaxie):
30

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 [297] 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 [297] 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. (Emphasis and underscoring supplied)

In this case, the LA, NLRC, and the CA all consistently found that SPI indeed suffered from serious business losses
which resulted in its permanent shutdown and accordingly, held the company’s closure to be valid. It is a rule that
absent any showing that the findings of fact of the labor tribunals and the appellate court are not supported by
evidence on record or the judgment is based on a misapprehension of facts, the Court shall not examine a new the
evidence submitted by the parties.  Perforce, without any cogent reason to deviate from the findings on the validity
31

of SPI’s closure, the Court thus holds that SPI is not obliged to give separation benefits to the minority employees
pursuant to Article 297 of the Labor Code as interpreted in the case of Galaxie. As such, SPI should not be directed
to give financial assistance amounting to ₱15,000.00 to each of the minority employees based on the Formal Offer
of Settlement. If at all, such formal offer should be deemed only as a calculated move on SPI’s part to further
minimize the expenses that it will be bound to incur should litigation drag on, and not as an indication that it was still
financially sustainable. However, since SPEU chose not to accept, said offer did not ripen into an enforceable
obligation on the part of SPI from which financial assistance could have been realized by the minority employees. 

B.Insufficient Notice of Closure.

Article 297 of the Labor Code provides that before any employee is terminated due to closure of business, it must
give a one (1) month prior written notice to the employee and to the DOLE. In this relation, case law instructs that it
is the personal right of the employee to be personally informed of his proposed dismissal as well as the reasons
therefor; and such requirement of notice is not a mere technicality or formality which the employer may dispense
with.  Since the purpose of previous notice is to, among others, give the employee some time to prepare for the
32

eventual loss of his job,  the employer has the positive duty to inform each and every employee of their impending
33

termination of employment. To this end, jurisprudence states that an employer’s act of posting notices to this effect
in conspicuous areas in the workplace is not enough.  Verily, for something as significant as the involuntary loss of
1âwphi1

one’s employment, nothing less than an individually-addressed notice of dismissal supplied to each worker is
proper. As enunciated in the case of Galaxie: 34

Finally, with regard to the notice requirement, the Labor Arbiter found, and it was upheld by the NLRC and the Court
of Appeals, that the written notice of closure or cessation of Galaxie’s business operations was posted on the
company bulletin board one month prior to its effectivity. The mere posting on the company bulletin board does
not, however, meet the requirement under Article [297] of "serving a written notice on the workers."The
purpose of the written notice is to inform the employees of the specific date of termination or closure of business
operations, and must be served upon them at least one month before the date of effectivity to give them sufficient
time to make the necessary arrangement. In order to meet the foregoing purpose, service of the written notice
must be made individually upon each and every employee of the company.(Emphasis and underscoring
supplied; citations omitted)

Keeping with these principles, the Court finds that the LA, NLRC, and CA erred in ruling that SPI complied with the
notice requirement when it merely posted various copies of its notice of closure in conspicuous places within the
business premises. As earlier explained, SPI was required to serve written notices of termination to its employees,
which it, however, failed to do. It is well to stress that while SPI had a valid ground to terminate its employees, i.e.,
closure of business, its failure to comply with the proper procedure for termination renders it liable to pay the
employee nominal damages for such omission. Based on existing jurisprudence, an employer which has a valid
Labor II – 1
cause for dismissing its employee but conducts the dismissal with procedural infirmity is liable to pay the employee
nominal damages in the amount of ₱30,000.00 if the ground for dismissal is a just cause, or the amount of
₱50,000.00 if the ground for dismissal is an authorized cause.  However, case law exhorts that in instances where
35

the payment of such damages becomes impossible, unjust, or too burdensome, modification becomes necessary in
order to harmonize the disposition with the prevailing circumstances.  Thus, in the case of Industrial Timber
36

Corporation v. Ababon  (Industrial Timber),the Court reduced the amount of nominal damages awarded to
37

employees from ₱50,000.00 to ₱10,000.00 since the authorized cause of termination was the employer’s closure or
cessation of business which was done in good faith and due to circumstances beyond the employer’s control,viz.: 38

In the determination of the amount of nominal damages which is addressed to the sound discretion of the court,
several factors are taken into account: (1) the authorized cause invoked, whether it was a retrenchment or a closure
or cessation of operation of the establishment due to serious business losses or financial reverses or otherwise; (2)
the number of employees to be awarded; (3) the capacity of the employers to satisfy the awards, taken into account
their prevailing financial status as borneby the records; (4) the employer’s grant of other termination benefits in favor
of the employees; and (5) whether there was a bona fide attempt to comply with the notice requirements as
opposed to giving no notice at all.

In the case at bar, there was a valid authorized cause considering the closure or cessation of ITC's business which
was done in good faith and due to circumstances beyond ITC's control. Moreover, ITC had ceased to generate any
income since its closure on August 17, 1990. Several months prior to the closure, ITC experienced diminished
income due to high production costs, erratic supply of raw materials, depressed prices, and poor market conditions
for its wood products. It appears that ITC had given its employees all benefits in accord with the CBA upon their
termination.

Thus, considering the circumstances obtaining in the case at bar, we deem it wise and just to reduce the
amount of nominal damages to be awarded for each employee to Pl0,000.00 each instead of 1!50,000.00
each. (Emphasis and underscoring supplied) 

In this case, considering that SPI closed down its operations due to serious business losses and that said closure
appears to have been done in good faith, the Court -similar to the case of Industrial Timber -deems it just to reduce
the amount of nominal damages to be awarded to each of the minority employees from ₱50,000.00 to Pl0,000.00.
To be clear, the foregoing award should only obtain in favor of the minority employees and not for those employees
who already received sums equivalent to separation pay and executed quitclaims "releasing [SPI] now and in the
future any claims and obligation which may arise as results of [their] employment with the company."  For these
39

latter employees who have already voluntarily accepted their dismissal, their executed quitclaims practically erased
the consequences of infirmities on the notice of dismissal,40 at least as to them.

WHEREFORE, the petitions are PARTLY GRANTED. The Decision dated January 12, 2006 and Resolution dated
June 14, 2006 of the Court of Appeals in CA-G.R. SP No. 88965 are hereby AFFIRMED with MODIFICATION
deleting the award of financial assistance in the amount of ₱15,000.00 to each of the minority employees. Instead,
Sangwoo Philippines, Inc. is ORDERED to pay nominal damages in the amount of Pl0,000.00 to each of the
minority employees.

Labor II – 1
74.) G.R. No. 164772             June 8, 2006

EQUITABLE BANKING CORPORATION (now known as EQUITABLE-PCI BANK), petitioner,

vs.
RICARDO SADAC, Respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari with Motion to Refer the Petition to the Court En Banc filed by
Equitable Banking Corporation (now known as Equitable-PCI Bank), seeking to reverse the Decision1 and
Resolution2 of the Court of Appeals, dated 6 April 2004 and 28 July 2004, respectively, as amended by the
Supplemental Decision3 dated 26 October 2004 in CA-G.R. SP No. 75013, which reversed and set aside the
Resolutions of the National Labor Relations Commission (NLRC), dated 28 March 2001 and 24 September 2002 in
NLRC-NCR Case No. 00-11-05252-89.

The Antecedents

As culled from the records, respondent Sadac was appointed Vice President of the Legal Department of petitioner
Bank effective 1 August 1981, and subsequently General Counsel thereof on 8 December 1981. On 26 June 1989,
nine lawyers of petitioner Bank’s Legal Department, in a letter-petition to the Chairman of the Board of Directors,
accused respondent Sadac of abusive conduct, inter alia, and ultimately, petitioned for a change in leadership of the
department. On the ground of lack of confidence in respondent Sadac, under the rules of client and lawyer
relationship, petitioner Bank instructed respondent Sadac to deliver all materials in his custody in all cases in which
the latter was appearing as its counsel of record. In reaction thereto, respondent Sadac requested for a full hearing
and formal investigation but the same remained unheeded. On 9 November 1989, respondent Sadac filed a
complaint for illegal dismissal with damages against petitioner Bank and individual members of the Board of
Directors thereof. After learning of the filing of the complaint, petitioner Bank terminated the services of respondent
Sadac. Finally, on 10 August 1989, respondent Sadac was removed from his office and ordered disentitled to any
compensation and other benefits.4

In a Decision5 dated 2 October 1990, Labor Arbiter Jovencio Ll. Mayor, Jr., dismissed the complaint for lack of merit.
On appeal, the NLRC in its Resolution6 of 24 September 1991 reversed the Labor Arbiter and declared respondent
Sadac’s dismissal as illegal. The decretal portion thereof reads, thus:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is hereby,
SET ASIDE, and a new one ENTERED declaring the dismissal of the complainant as illegal, and consequently
ordering the respondents jointly and severally to reinstate him to his former position as bank Vice-President and
General Counsel without loss of seniority rights and other privileges, and to pay him full backwages and other
benefits from the time his compensation was withheld to his actual reinstatement, as well as moral damages of
P100,000.00, exemplary damages of P50,000.00, and attorney’s fees equivalent to Ten Percent (10%) of the
monetary award. Should reinstatement be no longer possible due to strained relations, the respondents are ordered
likewise jointly and severally to grant separation pay at one (1) month per year of service in the total sum of
P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date,
subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00
(exemplary damages) and attorney’s fees equal to Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.7

Petitioner Bank came to us for the first time via a Special Civil Action for Certiorari assailing the NLRC Resolution of
24 September 1991 in Equitable Banking Corporation v. National Labor Relations Commission, docketed as G.R.
No. 102467.8

In our Decision9 of 13 June 1997, we held respondent Sadac’s dismissal illegal. We said that the existence of the
employer-employee relationship between petitioner Bank and respondent Sadac had been duly established bringing

Labor II – 1
the case within the coverage of the Labor Code, hence, we did not permit petitioner Bank to rely on Sec. 26, Rule
13810 of the Rules of Court, claiming that the association between the parties was one of a client-lawyer relationship,
and, thus, it could terminate at any time the services of respondent Sadac. Moreover, we did not find that
respondent Sadac’s dismissal was grounded on any of the causes stated in Article 282 of the Labor Code. We
similarly found that petitioner Bank disregarded the procedural requirements in terminating respondent Sadac’s
employment as so required by Section 2 and Section 5, Rule XIV, Book V of the Implementing Rules of the Labor
Code. We decreed:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following MODIFICATIONS:
That private respondent shall be entitled to backwages from termination of employment until turning sixty (60) years
of age (in 1995) and, thereupon, to retirement benefits in accordance with law; that private respondent shall be paid
an additional amount of P5,000.00; that the award of moral and exemplary damages are deleted; and that the
liability herein pronounced shall be due from petitioner bank alone, the other petitioners being absolved from
solidary liability. No costs.11

On 28 July 1997, our Decision in G.R. No. 102467 dated 13 June 1997 became final and executory.12

Pursuant thereto, respondent Sadac filed with the Labor Arbiter a Motion for Execution13 thereof. Likewise, petitioner
Bank filed a Manifestation and Motion14 praying that the award in favor of respondent Sadac be computed and that
after payment is made, petitioner Bank be ordered forever released from liability under said judgment.

Per respondent Sadac’s computation, the total amount of the monetary award is P6,030,456.59, representing his
backwages and other benefits, including the general increases which he should have earned during the period of his
illegal termination. Respondent Sadac theorized that he started with a monthly compensation of P12,500.00 in
August 1981, when he was appointed as Vice President of petitioner Bank’s Legal Department and later as its
General Counsel in December 1981. As of November 1989, when he was dismissed illegally, his monthly
compensation amounted to P29,365.00 or more than twice his original compensation. The difference, he posited,
can be attributed to the annual salary increases which he received equivalent to 15 percent (15%) of his monthly
salary.

Respondent Sadac anchored his claim on Article 279 of the Labor Code of the Philippines, and cited as authority
the cases of East Asiatic Company, Ltd. v. Court of Industrial Relations,15 St. Louis College of Tuguegarao v.
National Labor Relations Commission,16 and Sigma Personnel Services v. National Labor Relations
Commission.17 According to respondent Sadac, the catena of cases uniformly holds that it is the obligation of the
employer to pay an illegally dismissed employee the whole amount of the salaries or wages, plus all other benefits
and bonuses and general increases to which he would have been normally entitled had he not been dismissed; and
therefore, salary increases should be deemed a component in the computation of backwages. Moreover,
respondent Sadac contended that his check-up benefit, clothing allowance, and cash conversion of vacation leaves
must be included in the computation of his backwages.

Petitioner Bank disputed respondent Sadac’s computation. Per its computation, the amount of monetary award due
respondent Sadac is P2,981,442.98 only, to the exclusion of the latter’s general salary increases and other claimed
benefits which, it maintained, were unsubstantiated. The jurisprudential precedent relied upon by petitioner Bank in
assailing respondent Sadac’s computation is Evangelista v. National Labor Relations Commission,18 citing
Paramount Vinyl Products Corp. v. National Labor Relations Commission,19 holding that an unqualified award of
backwages means that the employee is paid at the wage rate at the time of his dismissal. Furthermore, petitioner
Bank argued before the Labor Arbiter that the award of salary differentials is not allowed, the established rule being
that upon reinstatement, illegally dismissed employees are to be paid their backwages without deduction and
qualification as to any wage increases or other benefits that may have been received by their co-workers who were
not dismissed or did not go on strike.

On 2 August 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. rendered an Order20 adopting respondent Sadac’s
computation. In the main, the Labor Arbiter relying on Millares v. National Labor Relations Commission21 concluded
that respondent Sadac is entitled to the general increases as a component in the computation of his backwages.
Accordingly, he awarded respondent Sadac the amount of P6,030,456.59 representing his backwages inclusive of
allowances and other claimed benefits, namely check-up benefit, clothing allowance, and cash conversion of
vacation leave plus 12 percent (12%) interest per annum equivalent to P1,367,590.89 as of 30 June 1999, or a total
Labor II – 1
of P7,398,047.48. However, considering that respondent Sadac had already received the amount of P1,055,740.48
by virtue of a Writ of Execution22 earlier issued on 18 January 1999, the Labor Arbiter directed petitioner Bank to pay
respondent Sadac the amount of P6,342,307.00. The Labor Arbiter also granted an award of attorney’s fees
equivalent to ten percent (10%) of all monetary awards, and imposed a 12 percent (12%) interest per annum
reckoned from the finality of the judgment until the satisfaction thereof.

The Labor Arbiter decreed, thus:

WHEREFORE, in view of al (sic) the foregoing, let an "ALIAS" Writ of Execution be issued commanding the Sheriff,
this Branch, to collect from respondent Bank the amount of Ph6,342,307.00 representing the backwages with 12%
interest per annum due complainant.23

Petitioner Bank interposed an appeal with the NLRC, which reversed the Labor Arbiter in a
Resolution,24 promulgated on 28 March 2001. It ratiocinated that the doctrine on general increases as component in
computing backwages in Sigma Personnel Services and St. Louis was merely obiter dictum. The NLRC found East
Asiatic Co., Ltd. inapplicable on the ground that the original circumstances therein are not only peculiar to the said
case but also completely strange to the case of respondent Sadac. Further, the NLRC disallowed respondent
Sadac’s claim to check-up benefit ratiocinating that there was no clear and substantial proof that the same was
being granted and enjoyed by other employees of petitioner Bank. The award of attorney’s fees was similarly
deleted.

The dispositive portion of the Resolution states:

WHEREFORE, the instant appeal is considered meritorious and accordingly, the computation prepared by
respondent Equitable Banking Corporation on the award of backwages in favor of complainant Ricardo Sadac under
the decision promulgated by the Supreme Court on June 13, 1997 in G.R. No. 102476 in the aggregate amount of
P2,981,442.98 is hereby ordered.25

Respondent Sadac’s Motion for Reconsideration thereon was denied by the NLRC in its Resolution,26 promulgated
on 24 September 2002.

Aggrieved, respondent Sadac filed before the Court of Appeals a Petition for Certiorari seeking nullification of the
twin resolutions of the NLRC, dated 28 March 2001 and 24 September 2002, as well as praying for the
reinstatement of the 2 August 1999 Order of the Labor Arbiter.

For the resolution of the Court of Appeals were the following issues, viz.:

(1) Whether periodic general increases in basic salary, check-up benefit, clothing allowance, and cash
conversion of vacation leave are included in the computation of full backwages for illegally dismissed
employees;

(2) Whether respondent is entitled to attorney’s fees; and

(3) Whether respondent is entitled to twelve percent (12%) per annum as interest on all accounts
outstanding until full payment thereof.

Finding for respondent Sadac (therein petitioner), the Court of Appeals rendered a Decision on 6 April 2004, the
dispositive portion of which is quoted hereunder:

WHEREFORE, premises considered, the March 28, 2001 and the September 24, 2002 Resolutions of the National
Labor Relations Commissions (sic) are REVERSED and SET ASIDE and the August 2, 1999 Order of the Labor
Arbiter is REVIVED to the effect that private respondent is DIRECTED TO PAY petitioner the sum of
PhP6,342,307.00, representing full back wages (sic) which sum includes annual general increases in basic salary,
check-up benefit, clothing allowance, cash conversion of vacation leave and other sundry benefits plus 12% per
annum interest on outstanding balance from July 28, 1997 until full payment.

Labor II – 1
Costs against private respondent.27

The Court of Appeals, citing East Asiatic held that respondent Sadac’s general increases should be added as part of
his backwages. According to the appellate court, respondent Sadac’s entitlement to the annual general increases
has been duly proven by substantial evidence that the latter, in fact, enjoyed an annual increase of more or less 15
percent (15%). Respondent Sadac’s check-up benefit, clothing allowance, and cash conversion of vacation leave
were similarly ordered added in the computation of respondent Sadac’s basic wage.

Anent the matter of attorney’s fees, the Court of Appeals sustained the NLRC. It ruled that our Decision28 of 13 June
1997 did not award attorney’s fees in respondent Sadac’s favor as there was nothing in the aforesaid Decision,
either in the dispositive portion or the body thereof that supported the grant of attorney’s fees. Resolving the final
issue, the Court of Appeals imposed a 12 percent (12%) interest per annum on the total monetary award to be
computed from 28 July 1997 or the date our judgment in G.R. No. 102467 became final and executory until fully
paid at which time the quantification of the amount may be deemed to have been reasonably ascertained.

On 7 May 2004, respondent Sadac filed a Partial Motion for Reconsideration29 of the 6 April 2004 Court of Appeals
Decision insofar as the appellate court did not award him attorney’s fees. Similarly, petitioner Bank filed a Motion for
Partial Reconsideration thereon. Following an exchange of pleadings between the parties, the Court of Appeals
rendered a Resolution,30 dated 28 July 2004, denying petitioner Bank’s Motion for Partial Reconsideration for lack of
merit.

Assignment of Errors

Hence, the instant Petition for Review by petitioner Bank on the following assignment of errors, to wit:

(a) The Hon. Court of Appeals erred in ruling that general salary increases should be included in the
computation of full backwages.

(b) The Hon. Court of Appeals erred in ruling that the applicable authorities in this case are: (i) East Asiatic,
Ltd. v. CIR, 40 SCRA 521 (1971); (ii) St. Louis College of Tuguegarao v. NLRC, 177 SCRA 151 (1989); (iii)
Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993); and (iv) Millares v. NLRC, 305 SCRA 500
(1999) and not (i) Art. 279 of the Labor Code; (ii) Paramount Vinyl Corp. v. NLRC, 190 SCRA 525 (1990);
(iii) Evangelista v. NLRC, 249 SCRA 194 (1995); and (iv) Espejo v. NLRC, 255 SCRA 430 (1996).

(c) The Hon. Court of Appeals erred in ruling that respondent is entitled to check-up benefit, clothing
allowance and cash conversion of vacation leaves notwithstanding that respondent did not present any
evidence to prove entitlement to these claims.

(d) The Hon. Court of Appeals erred in ruling that respondent is entitled to be paid legal interest even if the
principal amount due him has not yet been correctly and finally determined.31

Meanwhile, on 26 October 2004, the Court of Appeals rendered a Supplemental Decision granting respondent
Sadac’s Partial Motion for Reconsideration and amending the dispositive portion of the 6 April 2004 Decision in this
wise, viz.:

WHEREFORE, premises considered, the March 24 (sic), 2001 and the September 24, 2002 Resolutions of the
National Labor Relations Commission are hereby REVERSED and SET ASIDE and the August 2, 1999 Order of the
Labor Arbiter is hereby REVIVED to the effect that private respondent is hereby DIRECTED TO PAY petitioner the
sum of P6,342,307.00, representing full backwages which sum includes annual general increases in basic salary,
check-up benefit, clothing allowance, cash conversion of vacation leave and other sundry benefits "and attorney’s
fees equal to TEN PERCENT (10%) of all the monetary award" plus 12% per annum interest on all outstanding
balance from July 28, 1997 until full payment.

Costs against private respondent.32

Labor II – 1
On 22 November 2004, petitioner Bank filed a Supplement to Petition for Review33 contending in the main that the
Court of Appeals erred in issuing the Supplemental Decision by directing petitioner Bank to pay an additional
amount to respondent Sadac representing attorney’s fees equal to ten percent (10%) of all the monetary award.

The Court’s Ruling

I.

We are called to write finis to a controversy that comes to us for the second time. At the core of the instant case are
the divergent contentions of the parties on the manner of computation of backwages.

Petitioner Bank asseverates that Article 279 of the Labor Code of the Philippines does not contemplate the inclusion
of salary increases in the definition of "full backwages." It controverts the reliance by the appellate court on the
cases of (i) East Asiatic; (ii) St. Louis; (iii) Sigma Personnel; and (iv) Millares. While it is in accord with the
pronouncement of the Court of Appeals that Republic Act No. 6715, in amending Article 279, intends to give more
benefits to workers, petitioner Bank submits that the Court of Appeals was in error in relying on East Asiatic to
support its finding that salary increases should be included in the computation of backwages as nowhere in Article
279, as amended, are salary increases spoken of. The prevailing rule in the milieu of the East Asiatic doctrine was
to deduct earnings earned elsewhere from the amount of backwages payable to an illegally dismissed employee.

Petitioner Bank posits that even granting that East Asiatic allowed general salary increases in the computation of
backwages, it was because the inclusion was purposely to cushion the blow of the deduction of earnings derived
elsewhere; with the amendment of Article 279 and the consequent elimination of the rule on the deduction of
earnings derived elsewhere, the rationale for including salary increases in the computation of backwages no longer
exists. On the references of salary increases in the aforementioned cases of (i) St. Louis; (ii) Sigma Personnel; and
(iii) Millares, petitioner Bank contends that the same were merely obiter dicta. In fine, petitioner Bank anchors its
claim on the cases of (i) Paramount Vinyl Products Corp. v. National Labor Relations Commission;34 (ii) Evangelista
v. National Labor Relations Commission;35 and (iii) Espejo v. National Labor Relations Commission,36 which ruled
that an unqualified award of backwages is exclusive of general salary increases and the employee is paid at the
wage rate at the time of the dismissal.

For his part, respondent Sadac submits that the Court of Appeals was correct when it ruled that his backwages
should include the general increases on the basis of the following cases, to wit: (i) East Asiatic; (ii) St. Louis; (iii)
Sigma Personnel; and (iv) Millares.

Resolving the protracted litigation between the parties necessitates us to revisit our pronouncements on the
interpretation of the term backwages. We said that backwages in general are granted on grounds of equity for
earnings which a worker or employee has lost due to his illegal dismissal.37 It is not private compensation or
damages but is awarded in furtherance and effectuation of the public objective of the Labor Code. Nor is it a redress
of a private right but rather in the nature of a command to the employer to make public reparation for dismissing an
employee either due to the former’s unlawful act or bad faith.38 The Court, in the landmark case of Bustamante v.
National Labor Relations Commission,39 had the occasion to explicate on the meaning of full backwages as
contemplated by Article 27940 of the Labor Code of the Philippines, as amended by Section 34 of Rep. Act No. 6715.
The Court in Bustamante said, thus:

The Court deems it appropriate, however, to reconsider such earlier ruling on the computation of backwages as
enunciated in said Pines City Educational Center case, by now holding that conformably with the evident legislative
intent as expressed in Rep. Act No. 6715, above-quoted, backwages to be awarded to an illegally dismissed
employee, should not, as a general rule, be diminished or reduced by the earnings derived by him elsewhere during
the period of his illegal dismissal. The underlying reason for this ruling is that the employee, while litigating the
legality (illegality) of his dismissal, must still earn a living to support himself and family, while full backwages have to
be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee. The clear
legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously
given them under the Mercury Drug rule or the "deduction of earnings elsewhere" rule. Thus, a closer adherence to
the legislative policy behind Rep. Act No. 6715 points to "full backwages" as meaning exactly that, i.e., without
deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his
illegal dismissal. In other words, the provision calling for "full backwages" to illegally dismissed employees is clear,
Labor II – 1
plain and free from ambiguity and, therefore, must be applied without attempted or strained interpretation. Index
animi sermo est.41

Verily, jurisprudence has shown that the definition of full backwages has forcefully evolved. In Mercury Drug Co.,
Inc. v. Court of Industrial Relations,42 the rule was that backwages were granted for a period of three years without
qualification and without deduction, meaning, the award of backwages was not reduced by earnings actually earned
by the dismissed employee during the interim period of the separation. This came to be known as the Mercury Drug
rule.43 Prior to the Mercury Drug ruling in 1974, the total amount of backwages was reduced by earnings obtained by
the employee elsewhere from the time of the dismissal to his reinstatement. The Mercury Drug rule was
subsequently modified in Ferrer v. National Labor Relations Commission44 and Pines City Educational Center v.
National Labor Relations Commission,45 where we allowed the recovery of backwages for the duration of the illegal
dismissal minus the total amount of earnings which the employee derived elsewhere from the date of dismissal up to
the date of reinstatement, if any. In Ferrer and in Pines, the three-year period was deleted, and instead, the
dismissed employee was paid backwages for the entire period that he was without work subject to the deductions,
as mentioned. Finally came our ruling in Bustamante which superseded Pines City Educational Center and allowed
full recovery of backwages without deduction and without qualification pursuant to the express provisions of Article
279 of the Labor Code, as amended by Rep. Act No. 6715, i.e., without any deduction of income the employee may
have derived from employment elsewhere from the date of his dismissal up to his reinstatement, that is, covering the
entirety of the period of the dismissal.

The first issue for our resolution involves another aspect in the computation of full backwages, mainly, the basis of
the computation thereof. Otherwise stated, whether general salary increases should be included in the base figure
to be used in the computation of backwages.

In so concluding that general salary increases should be made a component in the computation of backwages, the
Court of Appeals ratiocinated, thus:

The Supreme Court held in East Asiatic, Ltd. v. Court of Industrial Relations, 40 SCRA 521 (1971) that "general
increases" should be added as a part of full backwages, to wit:

In other words, the just and equitable rule regarding the point under discussion is this: It is the obligation of the
employer to pay an illegally dismissed employee or worker the whole amount of the salaries or wages, plus all other
benefits and bonuses and general increases, to which he would have been normally entitled had he not been
dismissed and had not stopped working, but it is the right, on the other hand of the employer to deduct from the total
of these, the amount equivalent to the salaries or wages the employee or worker would have earned in his old
employment on the corresponding days he was actually gainfully employed elsewhere with an equal or higher salary
or wage, such that if his salary or wage in his other employment was less, the employer may deduct only what has
been actually earned.

The doctrine in East Asiatic was subsequently reiterated, in the cases of St. Louis College of Tugueg[a]rao v. NLRC,
177 SCRA 151 (1989); Sigma Personnel Services v. NLRC, 224 SCRA 181 (1993) and Millares v. National Labor
Relations Commission, 305 SCRA 500 (1999).

Private respondent, in opposing the petitioner’s contention, alleged in his Memorandum that only the wage rate at
the time of the employee’s illegal dismissal should be considered – private respondent citing the following decisions
of the Supreme Court: Paramount Vinyl Corp. v. NLRC 190 SCRA 525 (1990); Evangelista v. NLRC, 249 SCRA 194
(1995); Espejo v. NLRC, 255 SCRA 430 (1996) which rendered obsolete the ruling in East Asiatic, Ltd. v. Court of
Industrial Relations, 40 SCRA 521 (1971).

We are not convinced.

The Supreme Court had consistently held that payment of full backwages is the price or penalty that the employer
must pay for having illegally dismissed an employee.

In Ala Mode Garments, Inc. v. NLRC 268 SCRA 497 (1997) and Bustamante v. NLRC and Evergreen Farms, Inc.
265 SCRA 61 (1996) the Supreme Court held that the clear legislative intent in the amendment in Republic Act 6715

Labor II – 1
was to give more benefits to workers than was previously given them under the Mercury Drug rule or the
"deductions of earnings elsewhere" rule.

The Paramount Vinyl, Evangelista, and Espejo cases cited by private respondent are inapplicable to the case at bar.
The doctrines therein came about as a result of the old Mercury Drug rule, which was repealed with the passage of
Republic Act 6715 into law. It was in Alex Ferrer v. NLRC 255 SCRA 430 (1993) when the Supreme Court returned
to the doctrine in East Asiatic, which was soon supplanted by the case of Bustamante v. NLRC and Evergreen
Farms, Inc., which held that the backwages to be awarded to an illegally dismissed employee, should not, as a
general rule, be diminished or reduced by the earnings derived from him during the period of his illegal dismissal.
Furthermore, the Mercury Drug rule was never meant to prejudice the workers, but merely to speed the recovery of
their backwages.

Ever since Mercury Drug Co. Inc. v. CIR 56 SCRA 694 (1974), it had been the intent of the Supreme Court to
increase the backwages due an illegally dismissed employee. In the Mercury Drug case, full backwages was to be
recovered even though a three-year limitation on recovery of full backwages was imposed in the name of equity.
Then in Bustamante, full backwages was interpreted to mean absolutely no deductions regardless of the duration of
the illegal dismissal. In Bustamante, the Supreme Court no longer regarded equity as a basis when dealing with
illegal dismissal cases because it is not equity at play in illegal dismissals but rather, it is employer’s obligation to
pay full back wages (sic). It is an obligation of the employer because it is "the price or penalty the employer has to
pay for illegally dismissing his employee."

The applicable modern definition of full backwages is now found in Millares v. National Labor Relations Commission
305 SCRA 500 (1999), where although the issue in Millares concerned separation pay – separation pay and
backwages both have employee’s wage rate at their foundation.

x x x The rationale is not difficult to discern. It is the obligation of the employer to pay an illegally dismissed
employee the whole amount of his salaries plus all other benefits, bonuses and general increases to which he would
have been normally entitled had he not been dismissed and had not stopped working. The same holds true in case
of retrenched employees. x x x

xxxx

x x x Annual general increases are akin to "allowances" or "other benefits." 46 (Italics ours.)

We do not agree.

Attention must be called to Article 279 of the Labor Code of the Philippines, as amended by Section 34 of Rep. Act
No. 6715. The law provides as follows:

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

Article 279 mandates that an employee’s full backwages shall be inclusive of allowances and other benefits or their
monetary equivalent. Contrary to the ruling of the Court of Appeals, we do not see that a salary increase can be
interpreted as either an allowance or a benefit. Salary increases are not akin to allowances or benefits, and cannot
be confused with either. The term "allowances" is sometimes used synonymously with "emoluments," as indirect or
contingent remuneration, which may or may not be earned, but which is sometimes in the nature of compensation,
and sometimes in the nature of reimbursement.47 Allowances and benefits are granted to the employee apart or
separate from, and in addition to the wage or salary. In contrast, salary increases are amounts which are added to
the employee’s salary as an increment thereto for varied reasons deemed appropriate by the employer. Salary
increases are not separate grants by themselves but once granted, they are deemed part of the employee’s salary.
To extend the coverage of an allowance or a benefit to include salary increases would be to strain both the
imagination of the Court and the language of law. As aptly observed by the NLRC, "to otherwise give the meaning

Labor II – 1
other than what the law speaks for by itself, will open the floodgates to various interpretations."48 Indeed, if the intent
were to include salary increases as basis in the computation of backwages, the same should have been explicitly
stated in the same manner that the law used clear and unambiguous terms in expressly providing for the inclusion
of allowances and other benefits.

Moreover, we find East Asiatic inapplicable to the case at bar. In East Asiatic, therein petitioner East Asiatic
Company, Ltd. was found guilty of unfair labor practices against therein respondent, Soledad A. Dizon, and the
Court ordered her reinstatement with back pay. On the question of the amount of backwages, the Court granted the
dismissed employee the whole amount of the salaries plus all general increases and bonuses she would have
received during the period of her lay-off with the corresponding right of the employer to deduct from the total
amounts, all the earnings earned by the employee during her lay-off. The emphasis in East Asiatic is the duty of
both the employer and the employee to disclose the material facts and competent evidence within their peculiar
knowledge relative to the proper determination of backwages, especially as the earnings derived by the employee
elsewhere are deductions to which the employer are entitled. However, East Asiatic does not find relevance in the
resolution of the issue before us. First, the material date to consider is 21 March 1989, when the law amending
Article 279 of the Labor Code, Rep. Act No. 6715, otherwise known as the Herrera-Veloso Law, took effect. It is
obvious that the backdrop of East Asiatic, decided by this Court on 31 August 1971 was prior to the current state of
the law on the definition of full backwages. Second, it bears stressing that East Asiatic was decided at a time when
even as an illegally dismissed employee is entitled to the whole amount of the salaries or wages, it was the
recognized right of the employer to deduct from the total of these, the amount equivalent to the salaries or wages
the employee or worker would have earned in his old employment on the corresponding days that he was actually
gainfully employed elsewhere with an equal or higher salary or wage, such that if his salary or wage in his other
employment was less, the employer may deduct only what has been actually earned.49 It is for this reason the Court
centered its discussion on the duty of both parties to be candid and open about facts within their knowledge to
establish the amount of the deductions, and not leave the burden on the employee alone to establish his claim, as
well as on the duty of the court to compel the parties to cooperate in disclosing such material facts. The
inapplicability of East Asiatic to respondent Sadac was sufficiently elucidated upon by the NLRC, viz.:

A full discernment of the pertinent portion of the judgment sought to be executed in East Asiatic Co., Ltd. would
reveal as follows:

"x x x to reinstate Soledad A. Dizon immediately to her former position with backwages from September 1, 1958
until actually reinstated with all the rights and privileges acquired and due her, including seniority and such other
terms and conditions of employment AT THE TIME OF HER LAY-OFF"

The basis on which this doctrine was laid out was summed up by the Supreme Court which ratiocinated in this light.
To quote:

"x x x on the other hand, of the employer to deduct from the total of these, the amount equivalent to these salaries
or wages the employee or worker would have earned in his old employment on the corresponding days that he was
actually gainfully employed elsewhere with an equal or higher salary or wage, such that if his salary or wage in his
other employment was less, the employer may deduct only what has been actually earned x x x" (Ibid, pp. 547-548).

But the Supreme Court, in the instant case, pronounced a clear but different judgment from that of East Asiatic Co.
decretal portion, in this wise:

"WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following MODIFICATIONS:
that private respondent shall be entitled to backwages from termination of employment until turning sixty (60) years
of age (in 1995) and, thereupon, to retirement benefits in accordance with law; xxx"

Undisputably (sic), it was decreed in plain and unambiguous language that complainant Sadac "shall be entitled to
backwages." No more, no less.

Thus, this decree for Sadac cannot be considered in any way, substantially in essence, with the award of
backwages as pronounced for Ms. Dizon in the case of East Asiatic Co. Ltd.50

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In the same vein, we cannot accept the Court of Appeals’ reliance on the doctrine as espoused in Millares. It is
evident that Millares concerns itself with the computation of the salary base used in computing the separation pay of
petitioners therein. The distinction between backwages and separation pay is elementary. Separation pay is granted
where reinstatement is no longer advisable because of strained relations between the employee and the employer.
Backwages represent compensation that should have been earned but were not collected because of the unjust
dismissal. The bases for computing the two are different, the first being usually the length of the employee’s service
and the second the actual period when he was unlawfully prevented from working.51

The issue that confronted the Court in Millares was whether petitioners’ housing and transportation allowances
therein which they allegedly received on a monthly basis during their employment should have been included in the
computation of their separation pay. It is plain to see that the reference to general increases in Millares citing East
Asiatic was a mere obiter. The crux in Millares was our pronouncement that the receipt of an allowance on a
monthly basis does not ipso facto characterize it as regular and forming part of salary because the nature of the
grant is a factor worth considering. Whether salary increases are deemed part of the salary base in the computation
of backwages was not the issue in Millares.

Neither can we look at St. Louis of Tuguegarao to resolve the instant controversy. What was mainly contentious
therein was the inclusion of fringe benefits in the computation of the award of backwages, in particular additional
vacation and sick leaves granted to therein concerned employees, it evidently appearing that the reference to East
Asiatic in a footnote was a mere obiter dictum. Salary increases are not akin to fringe benefits52 and neither is it
logical to conceive of both as belonging to the same taxonomy.

We must also resolve against the applicability of Sigma Personnel Services to the case at bar. The basic issue
before the Court therein was whether the employee, Susan Sumatre, a domestic helper in Abu Dhabi, United Arab
Emirates, had been illegally dismissed, in light of the contention of Sigma Personnel Services, a duly licensed
recruitment agency, that the former was a mere probationary employee who was, on top of this status, mentally
unsound.53 Even a cursory reading of Sigma Personnel Services citing St. Louis College of Tuguegarao would
readily show that inclusion of salary increases in the computation of backwages was not at issue. The same was not
on all fours with the instant petition.

What, then, is the basis of computation of backwages? Are annual general increases in basic salary
deemed component in the computation of full backwages? The weight of authority leans in petitioner Bank’s
favor and against respondent Sadac’s claim for the inclusion of general increases in the computation of his
backwages.

We stressed in Paramount that an unqualified award of backwages means that the employee is paid at the wage
rate at the time of his dismissal, thus:

The determination of the salary base for the computation of backwages requires simply an application of judicial
precedents defining the term "backwages". Unfortunately, the Labor Arbiter erred in this regard. An unqualified
award of backwages means that the employee is paid at the wage rate at the time of his dismissal [Davao Free
Worker Front v. Court of Industrial Relations, G.R. No. L-29356, October 27, 1975, 67 SCRA 418; Capital Garments
Corporation v. Ople, G.R. No. 53627, September 30, 1982, 117 SCRA 473; Durabilt Recapping Plant & Company v.
NLRC, G.R. No. 76746, July 27, 1987, 152 SCRA 328]. And the Court has declared that the base figure to be used
in the computation of backwages due to the employee should include not just the basic salary, but also the regular
allowances that he had been receiving, such as the emergency living allowances and the 13th month pay mandated
under the law [See Pan-Philippine Life Insurance Corporation v. NLRC, G.R. No. 53721, June 29, 1982, 144 SCRA
866; Santos v. NLRC, G.R. No. 76721, September 21, 1987, 154 SCRA 166; Soriano v. NLRC, G.R. No. 75510,
October 27, 1987, 155 SCRA 124; Insular Life Assurance Co., Ltd. v. NLRC, supra.]54 (Emphasis supplied.)

There is no ambivalence in Paramount, that the base figure to be used in the computation of backwages is pegged
at the wage rate at the time of the employee’s dismissal, inclusive of regular allowances that the employee had
been receiving such as the emergency living allowances and the 13th month pay mandated under the law.

In Evangelista v. National Labor Relations Commission,55 we addressed the sole issue of whether the computation
of the award of backwages should be based on current wage level or the wage levels at the time of the dismissal.

Labor II – 1
We resolved that an unqualified award of backwages means that the employee is paid at the wage rate at the time
of his dismissal, thus:

As explicitly declared in Paramount Vinyl Products Corp. vs. NLRC, the determination of the salary base for the
computation of backwages requires simply an application of judicial precedents defining the term "backwages." An
unqualified award of backwages means that the employee is paid at the wage rate at the time of his dismissal.
Furthermore, the award of salary differentials is not allowed, the established rule being that upon reinstatement,
illegally dismissed employees are to be paid their backwages without deduction and qualification as to any wage
increases or other benefits that may have been received by their co-workers who were not dismissed or did not go
on strike.56

The case of Paramount was relied upon by the Court in the latter case of Espejo v. National Labor Relations
Commission,57 where we reiterated that the computation of backwages should be based on the basic salary at the
time of the employee’s dismissal plus the regular allowances that he had been receiving. Further, the clarification
made by the Court in General Baptist Bible College v. National Labor Relations Commission,58 settles the issue,
thus:

We also want to clarify that when there is an award of backwages this actually refers to backwages without
qualifications and deductions. Thus, We held that:

"The term ‘backwages without qualification and deduction’ means that the workers are to be paid their backwages
fixed as of the time of the dismissal or strike without deduction for their earnings elsewhere during their layoff and
without qualification of their wages as thus fixed; i.e., unqualified by any wage increases or other benefits that may
have been received by their co-workers who are not dismissed or did not go on strike. Awards including salary
differentials are not allowed. The salary base properly used should, however, include not only the basic salary but
also the emergency cost of living allowances and also transportation allowances if the workers are entitled
thereto."59 (Italics supplied.)

Indeed, even a cursory reading of the dispositive portion of the Court’s Decision of 13 June 1997 in G.R. No.
102467, awarding backwages to respondent Sadac, readily shows that the award of backwages therein is
unqualified, ergo, without qualification of the wage as thus fixed at the time of the dismissal and without deduction.

A demarcation line between salary increases and backwages was drawn by the Court in Paguio v. Philippine Long
Distance Telephone Co., Inc.,60 where therein petitioner Paguio, on account of his illegal transfer sought backwages,
including an amount equal to 16 percent (16%) of his monthly salary representing his salary increases during the
period of his demotion, contending that he had been consistently granted salary increases because of his above
average or outstanding performance. We said:

In several cases, the Court had the opportunity to elucidate on the reason for the grant of backwages. Backwages
are granted on grounds of equity to workers for earnings lost due to their illegal dismissal from work. They are a
reparation for the illegal dismissal of an employee based on earnings which the employee would have obtained,
either by virtue of a lawful decree or order, as in the case of a wage increase under a wage order, or by rightful
expectation, as in the case of one’s salary or wage. The outstanding feature of backwages is thus the degree of
assuredness to an employee that he would have had them as earnings had he not been illegally terminated from his
employment.

Petitioner’s claim, however, is based simply on expectancy or his assumption that, because in the past he had been
consistently rated for his outstanding performance and his salary correspondingly increased, it is probable that he
would similarly have been given high ratings and salary increases but for his transfer to another position in the
company.

In contrast to a grant of backwages or an award of lucrum cessans in the civil law, this contention is based merely
on speculation. Furthermore, it assumes that in the other position to which he had been transferred petitioner had
not been given any performance evaluation. As held by the Court of Appeals, however, the mere fact that petitioner
had been previously granted salary increases by reason of his excellent performance does not necessarily
guarantee that he would have performed in the same manner and, therefore, qualify for the said increase later.
What is more, his claim is tantamount to saying that he had a vested right to remain as Head of the Garnet
Labor II – 1
Exchange and given salary increases simply because he had performed well in such position, and thus he should
not be moved to any other position where management would require his services.61

Applying Paguio to the case at bar, we are not prepared to accept that this degree of assuredness applies to
respondent Sadac’s salary increases. There was no lawful decree or order supporting his claim, such that his salary
increases can be made a component in the computation of backwages. What is evident is that salary increases are
a mere expectancy. They are, by its nature volatile and are dependent on numerous variables, including the
company’s fiscal situation and even the employee’s future performance on the job, or the employee’s continued stay
in a position subject to management prerogative to transfer him to another position where his services are needed.
In short, there is no vested right to salary increases. That respondent Sadac may have received salary increases in
the past only proves fact of receipt but does not establish a degree of assuredness that is inherent in backwages.
From the foregoing, the plain conclusion is that respondent Sadac’s computation of his full backwages which
includes his prospective salary increases cannot be permitted.

Respondent Sadac cannot take exception by arguing that jurisprudence speaks only of wage and not salary, and
therefore, the rule is inapplicable to him. It is respondent Sadac’s stance that he was not paid at the wage rate nor
was he engaged in some form of manual or physical labor as he was hired as Vice President of petitioner Bank. He
cites Gaa v. Court of Appeals62 where the Court distinguished between wage and salary.

The reliance is misplaced. The distinction between salary and wage in Gaa was for the purpose of Article 1708 of
the Civil Code which mandates that, "[t]he laborer’s wage shall not be subject to execution or attachment, except for
debts incurred for food, shelter, clothing and medical attendance." In labor law, however, the distinction appears to
be merely semantics. Paramount and Evangelista may have involved wage earners, but the petitioner in Espejo was
a General Manager with a monthly salary of P9,000.00 plus privileges. That wage and salary are synonymous has
been settled in Songco v. National Labor Relations Commission.63 We said:

Broadly, the word "salary" means a recompense or consideration made to a person for his pains or industry in
another man’s business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman
soldier, it carries with it the fundamental idea of compensation for services rendered. Indeed, there is eminent
authority for holding that the words "wages" and "salary" are in essence synonymous (Words and Phrases, Vol. 38
Permanent Edition, p. 44 citing Hopkins vs. Cromwell, 85 N.Y.S.839, 841, 89 App. Div. 481; 38 Am. Jur. 496).
"Salary," the etymology of which is the Latin word "salarium," is often used interchangeably with "wage", the
etymology of which is the Middle English word "wagen". Both words generally refer to one and the same meaning,
that is, a reward or recompense for services performed. Likewise, "pay" is the synonym of "wages" and "salary"
(Black’s Law Dictionary, 5th Ed). x x x64 (Italics supplied.)

II.

Petitioner Bank ascribes as its second assignment of error the Court of Appeals’ ruling that respondent Sadac is
entitled to check-up benefit, clothing allowance and cash conversion of vacation leaves notwithstanding that
respondent Sadac did not present any evidence to prove entitlement to these claims.65

The determination of respondent Sadac’s entitlement to check-up benefit, clothing allowance, and cash conversion
of vacation leaves involves a question of fact. The well-entrenched rule is that only errors of law not of facts are
reviewable by this Court in a petition for review.66 The jurisdiction of this Court in a petition for review on certiorari
under Rule 45 of the 1997 Rules of Civil Procedure, as amended, is limited to reviewing only errors of law, not of
fact, unless the factual findings being assailed are not supported by evidence on record or the impugned judgment
is based on a misapprehension of facts.67 This Court is also not precluded from delving into and resolving issues of
facts, particularly if the findings of the Labor Arbiter are inconsistent with those of the NLRC and the Court of
Appeals.68 Such is the case in the instant petition. The Labor Arbiter and the Court of Appeals are in agreement
anent the entitlement of respondent Sadac to check-up benefit, clothing allowance, and cash conversion of vacation
leaves, but the findings of the NLRC were to the contrary. The Labor Arbiter sustained respondent Sadac’s
entitlement to check-up benefit, clothing allowance and cash conversion of vacation leaves. He gave weight to
petitioner Bank’s acknowledgment in its computation that respondent Sadac is entitled to certain benefits, namely,
rice subsidy, tuition fee allowance, and medicine allowance, thus, there exists no reason to deprive respondent
Sadac of his other benefits. The Labor Arbiter also reasoned that the petitioner Bank did not adduce evidence to
support its claim that the benefits sought by respondent Sadac are not granted to its employees and officers.
Labor II – 1
Similarly, the Court of Appeals ratiocinated that if ordinary employees are entitled to receive these benefits, so it is
with more reason for a Vice President, like herein respondent Sadac to receive the same.

We find in the records that, per petitioner Bank’s computation, the benefits to be received by respondent are
monthly rice subsidy, tuition fee allowance per year, and medicine allowance per year.69 Contained nowhere is an
acknowledgment of herein claimed benefits, namely, check-up benefit, clothing allowance, and cash conversion of
vacation leaves. We cannot sustain the rationalization that the acknowledgment by petitioner Bank in its
computation of certain benefits granted to respondent Sadac means that the latter is also entitled to the other
benefits as claimed by him but not acknowledged by petitioner Bank. The rule is, he who alleges, not he who
denies, must prove. Mere allegations by respondent Sadac does not suffice in the absence of proof supporting the
same.

III.

We come to the third assignment of error raised by petitioner Bank in its Supplement to Petition for Review,
assailing the 26 October 2004 Supplemental Decision of the Court of Appeals which amended the fallo of its 6 April
2004 Decision to include "attorney’s fees equal to TEN PERCENT (10%) of all the monetary award" granted to
respondent Sadac. Petitioner Bank posits that neither the dispositive portion of our 13 June 1997 Decision in G.R.
No. 102467 nor the body thereof awards attorney’s fees to respondent Sadac. It is postulated that the body of the
13 June 1997 Decision does not contain any findings of facts or conclusions of law relating to attorney’s fees, thus,
this Court did not intend to grant to respondent Sadac the same, especially in the light of its finding that the
petitioner Bank was not motivated by malice or bad faith and that it did not act in a wanton, oppressive, or
malevolent manner in terminating the services of respondent Sadac.70

We do not agree.

At the outset it must be emphasized that when a final judgment becomes executory, it thereby becomes immutable
and unalterable. The judgment may no longer be modified in any respect, even if the modification is meant to
correct what is perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is
attempted to be made by the Court rendering it or by the highest Court of the land. The only recognized exceptions
are the correction of clerical errors or the making of so-called nunc pro tunc entries which cause no prejudice to any
party, and, of course, where the judgment is void.71 The Court’s 13 June 1997 Decision in G.R. No. 102467 became
final and executory on 28 July 1997. This renders moot whatever argument petitioner Bank raised against the grant
of attorney’s fees to respondent Sadac. Of even greater import is the settled rule that it is the dispositive part of the
judgment that actually settles and declares the rights and obligations of the parties, finally, definitively, and
authoritatively, notwithstanding the existence of inconsistent statements in the body that may tend to confuse.72

Proceeding therefrom, we make a determination of whether the Court in Equitable Banking Corporation v. National
Labor Relations Commission,73 G.R. No. 102467, dated 13 June 1997, awarded attorney’s fees to respondent
Sadac. In recapitulation, the dispositive portion of the aforesaid Decision is hereunder quoted:

WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following MODIFICATIONS:
That private respondent shall be entitled to backwages from termination of employment until turning sixty (60) years
of age (in 1995) and, thereupon, to retirement benefits in accordance with law; that private respondent shall be paid
an additional amount of P5,000.00; that the award of moral and exemplary damages are deleted; and that the
liability herein pronounced shall be due from petitioner bank alone, the other petitioners being absolved from
solidary liability. No costs.74

The dispositive portion of the 24 September 1991 Decision of the NLRC awards respondent Sadac attorney’s fees
equivalent to ten percent (10%) of the monetary award, viz:

WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is hereby,
SET ASIDE and a new one ENTERED declaring the dismissal of the complainant as illegal, and consequently
ordering the respondents jointly and severally to reinstate him to his former position as bank Vice-President and
General Counsel without loss of seniority rights and other privileges, and to pay him full backwages and other
benefits from the time his compensation was withheld to his actual reinstatement, as well as moral damages of
P100,000.00, exemplary damages of P50,000.00, and attorney’s fees equivalent to Ten Percent (10%) of the
Labor II – 1
monetary award. Should reinstatement be no longer possible due to strained relations, the respondents are ordered
likewise jointly and severally to grant separation pay at one (1) month per year of service in the total sum of
P293,650.00 with backwages and other benefits from November 16, 1989 to September 15, 1991 (cut off date,
subject to adjustment) computed at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00
(exemplary damages) and attorney’s fees equal to Ten Percent (10%) of all the monetary award, or a grand total of
P1,649,329.53.75 (Italics Ours.)

As can be gleaned from the foregoing, the Court’s Decision of 13 June 1997 AFFIRMED with MODIFICATION the
NLRC Decision of 24 September 1991, which modification did not touch upon the award of attorney’s fees as
granted, hence, the award stands. Juxtaposing the decretal portions of the NLRC Decision of 24 September 1991
with that of the Court’s Decision of 13 June 1997, we find that what was deleted by the Court was "the award of
moral and exemplary damages," but not the award of "attorney’s fees equivalent to Ten Percent (10%) of the
monetary award." The issue on the grant of attorney’s fees to respondent Sadac has been adequately and
definitively threshed out and settled with finality when petitioner Bank came to us for the first time on a Petition for
Certiorari in Equitable Banking Corporation v. National Labor Relations Commission, docketed as G.R. No. 102467.
The Court had spoken in its Decision of 13 June 1997 in the said case which attained finality on 28 July 1997. It is
now immutable.

IV.

We proceed with the penultimate issue on the entitlement of respondent Sadac to twelve percent (12%) interest per
annum on the outstanding balance as of 28 July 1997, the date when our Decision in G.R. No. 102467 became final
and executory.

In Eastern Shipping Lines, Inc. v. Court of Appeals,76 the Court, speaking through the Honorable Justice Jose C.
Vitug, laid down the following rules of thumb:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of
the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual or compensatory damages, the
rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on

the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Article 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2 above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.77

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It is obvious that the legal interest of twelve percent (12%) per annum shall be imposed from the time judgment
becomes final and executory, until full satisfaction thereof. Therefore, petitioner Bank is liable to pay interest from 28
July 1997, the finality of our Decision in G.R. No. 102467.78 The Court of Appeals was not in error in imposing the
same notwithstanding that the parties were at variance in the computation of respondent Sadac’s backwages. What
is significant is that the Decision of 13 June 1997 which awarded backwages to respondent Sadac became final and
executory on 28 July 1997.

V.

Finally, petitioner Bank’s Motion to Refer the Petition En Banc must necessarily be denied as established in our
foregoing discussion. We are not herein modifying or reversing a doctrine or principle laid down by the Court en
banc or in a division. The instant case is not one that should be heard by the Court en banc.79 1avvphil.net

Fallo

WHEREFORE, the petition is PARTIALLY GRANTED in the sense that in the computation of the backwages,
respondent Sadac’s claimed prospective salary increases, check-up benefit, clothing allowance, and cash
conversion of vacation leaves are excluded. The petition is PARTIALLY DENIED insofar as we AFFIRMED the grant
of attorney’s fees equal to ten percent (10%) of all the monetary award and the imposition of twelve percent (12%)
interest per annum on the outstanding balance as of 28 July 1997. Hence, the Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 75013, dated 6 April 2004 and 28 July 2004, respectively, and the Supplemental
Decision dated 26 October 2004 are MODIFIED in the following manner, to wit:

Petitioner Bank is DIRECTED TO PAY respondent Sadac the following:

(1) BACKWAGES in accordance with Our Decision dated 13 June 1997 in G.R. No. 102467 with a
clarification that the award of backwages EXCLUDES respondent Sadac’s claimed prospective salary
increases, check-up benefit, clothing allowance, and cash conversion of vacation leaves;

(2) ATTORNEY’S FEES equal to TEN PERCENT (10%) of the total sum of all monetary award; and

(3) INTEREST of TWELVE PERCENT (12%) per annum is hereby imposed on the total sum of all monetary
award from 28 July 1997, the date of finality of Our Decision in G.R. No. 102467 until full payment of the
said monetary award.

The Motion to Refer the Petition to the Court En Banc is DENIED.

Labor II – 1
75.) G.R. No. 168096               August 28, 2007

ALEX B. CARLOS, ABC SECURITY SERVICES, INC., and HONEST CARE JANITORIAL SERVICES,
INC., Petitioners,
vs.
COURT OF APPEALS, PERFECTO P. PIZARRO, JOEL B. DOCE, GUILLERMO F. SOLOMON, FRANCISCO U.
CORPUS and RONILLO GALLEGO, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by
petitioners Alex B. Carlos (Carlos), ABC Security Services, Inc. (ABC Security), and Honest Care Janitorial
Services, Inc. (Honest Care Janitorial), seeking to reverse and set aside the Decision,1 dated 31 August 2004 and
the Resolution,2 dated 9 May 2005 of the Court of Appeals in CA-G.R. SP No. 74458. The appellate court, in its
assailed Decision and Resolution affirmed the Decision dated 19 July 2002 and Resolution dated 30 August 2002 of
the National Labor Relations Commission (NLRC) in NLRC NCR-06-04079-93 finding the petitioners jointly and
severally liable for illegal dismissal, and ordering them to pay the private respondents backwages, separation pay,
overtime pay, 13th month pay, premium pay for rest days and holidays, and service incentive leave pay. The
dispositive portion of the assailed appellate court’s Decision thus reads:

WHEREFORE, for lack of merit, the instant petition is DENIED due course and, accordingly DISMISSED.
Consequently, the decision dated July 19, 2002 of the National Labor Relations Commission is AFFIRMED in toto.3

The factual and procedural antecedents of the instant petition are as follows:

Petitioner ABC Security is a domestic corporation engaged in the business of job contracting by providing security
services to its clientele. Petitioner Honest Care Janitorial is a domestic corporation likewise engaged in job
contracting janitorial services. It appears that Honest Care Janitorial was consolidated with ABC Security and the
consolidated corporations are represented in this action by its president, Alex B. Carlos.

Private respondents Perfecto P. Pizzaro (Pizzaro), Joel B. Doce (Doce), Francsico U. Corpus (Corpus) and Ronillo
Gallego (Gallego) were employed by petitioner ABC Security as security guards and were assigned to Greenvalley
Country Club at the time they were allegedly separated from employment. Private respondent Pizzaro was already
with petitioner ABC Security since 1975, while private respondent Corpus was employed in 1990. Private
respondents Doce and Gallego were both hired in 1987.4 Private respondent Solomon was employed by Honest
Care Janitorial as janitor supervisor since 1975 and was posted to different offices.5

On 22 July 1993, private respondents filed a Joint/Consolidated Complaint-Affidavit6 against petitioners praying for
the payment of minimum wage, 13th month pay, holiday pay, service incentive leave, cost of living allowance and
clothing allowance.

As shown by the Registry Return Receipt,7 petitioners received a copy of the complaint and the corresponding
summons on 16 July 1993. On the following day, private respondents Pizzaro, Solomon and Doce were allegedly
relieved from their posts and were not given new assignments. Subsequently, private respondents Gallego and
Corpus were also allegedly dismissed from employment.8

Private respondents claimed that every time they received their salaries, they were made to sign two sets of pay
slips, one was written in ink while the other was written in pencil. These two pay slips showed the amount of salaries
they actually received, which was below the minimum; but since the entries written on one of the pay slips they
signed were in pencil, there was a possibility that petitioners could alter the said entries to make it appear that they
were compliant with the labor laws.

Labor II – 1
For its part, petitioners averred that private respondents were not dismissed but voluntarily resigned from their
respective employments as evidenced by the resignation letters bearing their signatures. Petitioners claimed that
after private respondents’ assignment to Greenvalley Country Club ended, they were reassigned to other posts as
an exercise of management prerogative, but they refused to transfer and opted to resign. In addition, petitioners
alleged that private respondents’ resignations were prompted by the loss of bowling equipment in their custody,
which they were obliged to pay.

Petitioners further asseverated that the private respondents were paid the minimum wage in accordance with the
standards prescribed by the labor laws and received benefits including the overtime pay, cost of living allowance,
night differential pay, premium pay and 13th month pay as evidenced by the General Payroll of the company.
Private respondents’ signatures appeared on the said General Payroll, signifying that they were able to receive the
wages and benefits in accordance with the standard set by law.

On 31 August 1999, the Labor Arbiter found that petitioners submitted overwhelming documentary evidence to
refute the bare allegations of the private respondents and thereby dismissed the complaint for lack of merit. The
dispositive part of the Labor Arbiter’s Decision9 reads:

WHEREFORE, premises all considered, the instant complaint is dismissed for lack of merit.

On appeal, the NLRC reversed the Labor Arbiter’s findings by giving more evidentiary weight to private respondents’
testimonies in light of the factual circumstances of the case and thus declared that there was illegal dismissal. It
appears that petitioners received a copy of private respondents’ complaint on 16 July 1993, and shortly thereafter,
private respondents were dismissed from employment. The decretal portion of the NLRC Decision10 reads:

WHEREFORE, the decision appealed from is hereby REVERSED.

The [herein petitioners], who are hereby declared to be jointly and severally liable for the monetary awards, are
hereby ordered to pay the [herein private respondents] the following: (1) backwages (computed on the basis of the
applicable minimum wage rate on July 17, 1990) from the said date up to the date of the promulgation of this
decision; (2) separation pay equivalent to one month’s salary for every year of service from the date of hiring to the
date of the promulgation of this Decision; and (3) for the unexpired 3-year period, overtime pay of four (4) hours
daily, 13th month pay, premium pay for restdays and holidays, and service incentive leave pay.

Both petitioners and private respondents moved for the reconsideration of the above-quoted NLRC Decision.
Petitioners prayed for the NLRC to vacate its previous ruling finding them liable for illegal dismissal and for the
monetary claims of the private respondents. On the other hand, private respondents prayed that, in addition to
monetary awards, attorney’s fees be also awarded in their favor.

In a Resolution11 dated 30 August 2002, the NLRC denied the Motions for Reconsideration filed by the parties for
lack of cogent reason or palpable error to disturb its earlier findings.

Aggrieved, petitioners elevated the matter to the Court of Appeals by filing a Petition for Certiorari, alleging that the
NLRC abused its discretion in giving more credence to the empty allegations advanced by private respondents as
against the overwhelming documentary evidence on record which was fully substantiated by the testimonial
evidence they submitted during the proceedings before the Labor Arbiter.

On 31 August 2004, the Court of Appeals rendered a Decision affirming in toto the NLRC Decision. The appellate
court declared that there was no grave abuse of discretion on the part of the NLRC in giving more evidentiary weight
to the evidence submitted by the private respondents.

In addition, the Court of Appeals found that the defense posed by petitioners that private respondents were not
dismissed from employment but voluntarily resigned therefrom, is not plausible in light of the prompt filing of the
complaint for illegal dismissal. Indeed, resignation is inconsistent with the filing of action for illegal dismissal.

Similarly ill-fated was petitioners’ Motion for Reconsideration which was denied by the Court of Appeals in its
Resolution dated 9 May 2005.
Labor II – 1
Hence, this instant Petition for Review on Certiorari filed by petitioners assailing the foregoing Court of Appeals
Decision and Resolution and raising the following issues:

I.

WHETHER OR NOT THE PRIVATE PETITIONER ALEX B. CARLOS SHOULD BE INCLUDED IN THE
JUDGMENT.

II.

WHETHER OR NOT THE [PRIVATE RESPONDENTS] WERE IMPROPERLY PAID OF THEIR SALARIES
AND WAGES AS WELL AS BENEFITS UNDER THE LAW.

III.

WHETHER OR NOT [PRIVATE RESPONDENTS] WERE ILLEGALLY DISMISSED BY [PETITIONERS].

IV.

WHETHER OR NOT THE WRIT OF EXECUTION ISSUED BY THE LABOR ARBITER AND
IMPLEMENTED BY THE NLRC SHERIFF IS IMPROPER.

V.

WHETHER OR NOT THE PETITIONERS [RESPONDENTS] SHOULD BE ADJUDGED OF BACK WAGES

DURING THE PENDENCY OF THE CASE.12

At the outset, we must stress that this Court is not a trier of facts and does not routinely undertake the re-
examination of the evidence presented by the contending parties considering that, as general rule, the findings of
facts of the Court of Appeals are conclusive and binding on the Court.13 We have likewise held that 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, as long as they are supported by substantial evidence.14

Notably, the question of whether or not the private respondents were illegally dismissed from employment or
voluntarily resigned therefrom, as well as the issue of whether or not they are entitled to the monetary awards they
are claiming, are factual matters that should not be delved into by this Court.

As borne by the records, it appears that there is a divergence in the findings of facts of the Labor Arbiter on one
hand, from those of the NLRC, as affirmed by the Court of Appeals, on the other. For the purpose of clarity and
intelligibility therefore, this Court will make a scrunity of the decisions of the labor officials and appellate court and
ascertain whose findings are supported by evidence on record.

The Labor Arbiter found that the private respondents voluntarily resigned from employment, since they refused to be
assigned to another work station. The new assignment effected by petitioners was in valid exercise of their
management prerogative which should not take precedence over private respondents’ personal interests. The
NLRC and the Court of Appeals found otherwise.

In finding that private respondents were illegally dismissed, the Court of Appeals declared that the alleged
resignations of the private respondents were inconsistent with their filing of the complaint for illegal dismissal. It
decreed that it is illogical for private respondents to resign and then file a complaint for illegal dismissal thereafter.

For its part, the NLRC found that the confluence of the factual circumstances as to the date of the receipt by the
petitioners of the copy of the complaint filed by private respondents, which was in close succession to the time when
private respondents were relieved from their posts, leads to the reasonable conclusion that petitioners were indeed
illegally dismissed in retaliation for their filing of a complaint for money claims.

Labor II – 1
We see merit in the findings and conclusions drawn by the NLRC and the Court of Appeals. They are more in
accord with prudence, logic, common sense and sound judgment.

Time and again we have ruled that in illegal dismissal cases like the present one, the onus of proving that the
employee was not dismissed or if dismissed, that the dismissal was not illegal, rests on the employer and failure to
discharge the same would mean that the dismissal is not justified and therefore illegal.15

Thus, petitioners must not only rely on the weakness of private respondents’ evidence, but must stand on the merits
of their own defense. A party alleging a critical fact must support his allegation with substantial evidence, for any
decision based on unsubstantiated allegation and unreliable documentary evidence cannot stand, as it will offend
due process.

Petitioners failed to discharge this burden.

Petitioners’ complete reliance on the alleged resignation letters to support their claim that private respondents
voluntarily resigned is unavailing, as the filing of the complaint for illegal dismissal is inconsistent with
resignation.16 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.17

It is illogical for private respondents to resign and then file a complaint for illegal dismissal. We find it highly unlikely
that private respondents would just quit their jobs because they refused to take new assignments or attempted to
avoid any monetary liability for the purported loss of bowling equipment, after enduring long years of working for the
petitioners, notwithstanding the meager salary they were receiving and the lack of the appropriate labor and social
benefits. It would have been equally senseless for private respondents to file a complaint seeking payment of their
salaries and benefits, as mandated by law, then abandon subsequently and immediately their work by resigning.

In the same breath, we agree with the NLRC that the General Payrolls submitted by petitioners cannot be given the
stature of substantial evidence, not only because of evident inconsistencies of the entries therein with the factual
circumstances surrounding their preparation, but also because there is a high possibility that they could have been
manipulated, given that the General Payrolls are within the complete control and custody of the petitioners. We thus
quote with approval the findings of the NLRC:

Not only were the [herein private respondents] one in testifying that they did not receive the salaries stated in the
payrolls submitted by the [herein petitioners] – they were able to show that the payrolls in question were a sham
because [private respondent] Doce, whose signature appears on the payroll for January 1-15, 1990, could not have
signed the same, since at that time he was assigned, not in Greenvalley Country Club, but in Ajinomoto. Falsus in
unius, falsus in omnibus. The payrolls may not be given any weight. As a result, full weight must be accorded to
[private respondents’] testimonies to the effect that they worked twelve hours daily, and were not paid overtime pay,
13th month pay and premium pay for Sundays and holidays.18

The above-quoted NLRC Decision is anchored on the substantial evidence culled from the records that swayed the
reasonable mind of this Court to adopt its conclusion. Surely, petitioners cannot expect this Court to sustain its
stance and accord full evidentiary weight to the documentary and testimonial evidence they adduced in the absence
of clear, convincing and untarnished proof to discharge the allegations of the private respondents. Having failed in
this regard, we are constrained to sustain the findings of the NLRC as affirmed by the Court of Appeals in light of the
time-honored dictum that should doubt exist between the evidence presented by the employer and the employee,
the scales of justice must be tilted in favor of the latter.19

Accordingly, this Court finds no reason to disturb the monetary awards for backwages, separation pay, overtime
pay, 13th month pay, premium pay, holiday and service incentive leave pays ordered by the NLRC and the Court of
Appeals. In addition to the monetary awards, we find that the grant of backwages was likewise proper, with some
modification as to the computation of separation pay.

Labor II – 1
An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights
and other privileges and to full back wages, inclusive of allowances, and to other benefits or their monetary
equivalents computed from the time compensation was withheld up to the time of actual reinstatement.20

In explaining the rationale of this rule, we thus held in De la Cruz v. National Labor Relations Commission that21 :

The provision gives meaning to the laborer’s constitutional guaranty of security of tenure and finds solid basis on the
universal principles of justice and equity. The grant of back wages allows the unjustly and illegally dismissed
employee to recover from the employer that which the former lost by way of wages as a result of his dismissal from
employment.

Undoubtedly, private respondents are entitled to the payment of full backwages, that is, without deducting their
earnings elsewhere during the periods of their illegal dismissal. However, where, as in this case, reinstatement is no
longer feasible due to strained relations between the parties, separation pay equivalent to one month’s salary for
every year of service shall be granted.22

The question now arises: when is the period for computation of backwages and separation pay supposed to end?
This question was squarely addressed in Gaco v. National Labor Relations Commission23 where it was held that in
such circumstance, the computation shall be up to the time of finality of this Court's decision. Apparently, the
justification is that along with the finality of this Court's decision, the issue of illegal dismissal is finally laid to rest.24

The petitioners’ insistence that they cannot be held liable for backwages during the period of the pendency of this
action for they cannot be faulted for the delay of the disposition of this case cannot take precedence over the long-
standing and well-entrenched jurisprudential rule.

Parenthetically, the award for separation pay equivalent to one-month pay for every year of service shall be
computed from the time the private respondents were illegally separated from their employment up to the finality of
this Court’s Decision in the instant petition.

Furthermore, petitioners argue that the veil of corporate fiction of petitioners ABC Security and Honest Care
Janitorial should not be pierced, because said corporations have personalities separate and distinct from their
stockholders and from each other.

The petitioners must concede that they raised this issue belatedly, not having done so before the labor tribunals, but
only before the appellate court. Fundamental is the rule that theories and arguments not brought to the attention of
the trial court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot be raised for
the first time on appeal. However, even if this argument were to be addressed at this time, the Court still finds no
reason to uphold it.25 1avvphi1

Basic in corporation law is the principle that a corporation has a separate personality distinct from its stockholders
and from other corporations to which it may be connected. This feature flows from the legal theory that a corporate
entity is separate and distinct from its stockholders.26

However, the statutorily granted privilege of a corporate veil may be used only for legitimate purposes. On equitable
considerations, the veil can be disregarded when it is utilized as a shield to commit fraud, illegality or inequity; defeat
public convenience; confuse legitimate issues; or serve as a mere alter ego or business conduit of a person or an
instrumentality, agency or adjunct of another corporation. The legal fiction of a separate corporate personality in
those cited instances, for reasons of public policy and in the interest of justice, will be justifiably set aside.27

Petitioner Carlos admitted that he is not only the stockholder of petitioners ABC Security and Honest Care Janitorial,
but the General Manager of said corporations as well. Being the General Manager of these corporations, it is
assumed that petitioner Carlos possessed complete control of their affairs including matters pertaining to personnel
management, which includes the rates of pay, hours of work, selection or engagement of the employees, manner of
accomplishing their work, and their hiring and dismissal. It is highly plausible then that petitioner Carlos had a hand
not only in unilaterally terminating the private respondents’ employment, but also in paying private respondents’

Labor II – 1
wages below minimum and denying them the benefits accorded by the Labor Standard Law which includes, but is
not limited to, the payment of night-shift differential, overtime pay, premium pay and 13th month pay.

We cannot allow petitioner Carlos to hide behind the cloak of corporate fiction in order to evade liability. It bears
repeating that the corporate veil must be pierced and disregarded when it is utilized to commit fraud, illegality or
inequity.

Lastly, petitioners’ contention that the execution of the NLRC Decision pending review of this case is detrimental to
their interest is equally unavailing.

The pertinent provisions of the 2005 Revised Rules of Procedure of the National Labor Relations Commission
provides:

Rule VII
Proceeding Before the Commission

xxxx

Section 14. Finality of Decision of the Commission and Entry of Judgment. –

a) Finality of the Decisions, Resolutions or Orders of the Commission. – Except as provided in Section 9 of
Rule X, the decisions, resolutions or orders of the Commission shall become final and executory after ten
(10) calendar days from receipt thereof by the parties.

b) Entry of Judgment. – Upon the expiration of the ten (10) calendar day period provided in paragraph (a) of
this Section, the decision, resolution, or order shall be entered in a book of entries of judgment.

The Executive Clerk or Deputy Executive Clerk shall consider the decision, resolution or order as final and
executory after sixty (60) calendar days from the date of mailing in the absence of return cards, certifications from
the post office, or other proof of service to parties.

SECTION 15. MOTIONS FOR RECONSIDERATION. – Motion for reconsideration of any decision, resolution or
order of the Commission shall not be entertained except when based on palpable or patent errors; provided that the
motion is under oath and filed within ten (10) calendar days from receipt of decision, resolution or order, with proof
of service that a copy of the same has been furnished, within the reglementary period, the adverse party; and
provided further, that only such motion from the same party shall be entertained.

Should a motion for reconsideration be entertained pursuant to this section, the resolution shall be executory after
ten (10) calendar days from receipt thereof.

RULE XI
Execution Proceedings

xxxx

SECTION 10. Effect of Petition for Certiorari on Execution. – A petition for certiorari with the Court of Appeals or the
Supreme Court shall not stay the execution of the assailed decision unless a restraining order is issued by said
courts. (Emphasis supplied.)

Prescinding from the above, the private respondents had a clear right to move for the execution of the monetary
award of the NLRC pending appeal. The rule is in harmony with the social justice principle that poor employees who
have been deprived of their only source of livelihood should be provided the means to support their families.

Having said that, we need not further press that the proposition of the petitioners assailing the order granting
execution pending appeal of the NLRC Decision should fail.

Labor II – 1
WHEREFORE, premises considered, the instant Petition is DENIED. The Court of Appeals Decision dated 31
August 2004 and its Resolution dated 9 May 2005 in CA-G.R. SP No. 74458 are hereby AFFIRMED with
MODIFICATION as to the amount of backwages which shall be computed from the date of the private respondents’
dismissal up to the finality of this judgment. Costs against the petitioners.

Labor II – 1
76.) G.R. No. 152568             February 16, 2004

TOMAS CLAUDIO MEMORIAL COLLEGE, INC., petitioner,

vs.
COURT OF APPEALS and PEDRO NATIVIDAD, respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, as amended, seeking to reverse and
set aside the Decision1 of the Court of Appeals in CA-G.R. SP No. 62651, which affirmed with modification the
decision of the National Labor Relations Commission (NLRC) affirming the decision of the Labor Arbiter in NLRC
Case No. RAB IV-6-9082-97. The antecedent facts are as follows:

Sometime in 1983, private respondent Pedro Natividad started working with petitioner Tomas Claudio Memorial
College (TCMC) in Morong, Rizal. In time, he was promoted as "Liason Officer" of the school with the Department of
Education, Culture and Sports (DECS) and with the Commission on Higher Education (CHED) with the rank of
Assistant Registrar.

On June 10, 1996, the private respondent was arrested by the Morong police authorities, without any warrant
therefore, for violation of the Dangerous Drugs Act (Republic Act NO. 6425). A criminal complaint was later filed
against him, docketed as Criminal Case No. 5137. A preliminary investigation was conducted by the Municipal Court
of Morong, Rizal which found probable cause to hold him for trial. The court, on the said date, issued a warrant for
the private respondent’s arrest. The records were elevated to the Office of the Provincial Prosecutor of Rizal, and
was docketed as I.S. No. 96-4385.

In the interim, the petitioner, through its president, Aladdin F. Trinidad, sent a Memorandum2 dated June 13, 1996 to
the private respondent informing him that his employment was already terminated, thus:

...

The undersigned issued a Memorandum in cooperation with the program of the DECS denominated as "Drugless,"
"Smokeless" and "Violentless" School Campus intended to combat drug addiction in public and private schools.

Also, the undersigned has directed your immediate superior, Ms. Minda de la Vega to make a summary of your
absences for the School Year 1995-1996 and the Summer Term of 1996 as it has been observed that you have
been absenting yourself frequently and if you were asked to go to the DECS and to the CHED you do not return to
TCMC anymore.

Further, discreet inquiry is ongoing because of your secretive activities which has been rumored already among
those who were following your dealings with our students, we barely started our initial inquiry when the authorities
arrested you as a drug "pusher" and drug "user", a just cause to terminate employment. You are now in jail as you
were apprehended for possession of "shabu."

You are a dangerous employee in TCMC campus considering that we are in education.

For the above, please be informed that your services with TCMC is (sic) terminated effective upon receipt of this
memorandum.

You are barred also in (sic) entering [the] TCMC campus without Administration’s approval.

(SGD.) ALADDIN F. TRINIDAD

President3

Labor II – 1
The private respondent was thenceforth barred from entering the school without the petitioner’s approval. On July 5,
1996, the private respondent posted a bail bond in Criminal Case No. 5137 and was released from his detention
cell.4 He did not, however, file any complaint against the petitioner with the NLRC on account of his dismissal.

On October 2, 1996, the State Prosecutor issued a Resolution dismissing the criminal complaint in I.S. No. 96-4385
filed against the private respondent for lack of merit.5 The State Prosecutor reasoned out that:

On the date of the preliminary investigation, respondents submitted their separate counter-affidavits, supported by
the affidavits of their respective witnesses, and in it, both refuted the claim of the arresting officers that regulated
drugs were recovered from them.

There is obviously no basis to sustain the complaints. In the first place, the basis for the invitation extended to the
respondents, which is the alleged quarrel over drugs, is hearsay, as it was merely relayed to them, and they had no
personal knowledge of said incident.

In the second place, [the] respondents had not committed, are actually committing or are about to commit an
offense when they were invited, to the police station, so the police officers had no right to invite them for
questioning. Hence, the subsequent search made on the respondents had no legal basis. It follows that anything
recovered from them after their unlawful arrest are unadmissible (sic) as evidence against them, the same being the
fruit of the poisonous tree.6

On November 21, 1996, the private respondent was arrested anew by police authorities. The Morong Chief of Police
filed a criminal complaint docketed as Criminal Case No. 5251 against the private respondent for violation of Section
27, Article III of Rep. Act No. 6425, as amended.7 On February 17, 1997, an Information therefore was filed with the
Regional Trial Court of Morong docketed as Criminal Case No. 2661-M.8 On said date, the private respondent
posted a bail bond and was released from detention.

On June 11, 1997, the private respondent filed a complaint with the NLRC against the petitioner for illegal
dismissal.9 The case was docketed as NLRC Case No. RAB-IV-6-9082-97. The private respondent executed a
sworn statement claiming that (a) there was no factual basis for his dismissal; and (b) he was deprived of his rights
to due process.10 He also submitted the Joint Affidavit of Rose Baruel, Ellen Alcarde, Rosario Alvarez, Rosauro
Resurreccion and Aida S.D. Geronimo.11

Answering the complaint, the petitioner asserted that on or about March 1996, it had received an anonymous
telephone call branding the private respondent as not only a "drug user" but also a "pusher." After a discreet
investigation, the information was confirmed by unnamed tricycle drivers, students and school personnel. According
to the petitioner, the private respondent was connected to a syndicate supplying prohibited drugs and was selling
the same in a nearby billiard hall, in restaurants, and in other places immediately outside the perimeter of the school
gate.12 The petitioner further alleged that before the private respondent’s activities were reported to the police
authorities, he was arrested in October 1996 while at work and was jailed for violation of the Dangerous Drug Act.

On November 10, 1998, Acting Executive Labor Arbiter Pedro C. Ramos, rendered a decision dismissing the
complaint for lack of legal basis, thus:

WHERREFORE, premises considered, the complaint in this case for "illegal dismissal" is hereby ordered dismissed
for lack of legal basis.

SO ORDERED.13

The private respondent appealed the decision to the NLRC which affirmed the same. The NLRC also denied the
private respondent’s motion for the reconsideration of the said decision.

However, on certiorari with the Court of Appeals, the appellate court affirmed, with modification, the decision of the
NLRC, holding that although there was a valid cause for the private respondent’s dismissal, the petitioner did not
follow the procedure for the termination of his employment. The CA ordered the petitioner to pay backwages to the

Labor II – 1
private respondent from June 13, 1996 up to the finality of the said decision. The decretal portion of the CA decision
reads as follows:

WHEREFORE, the decision of the public respondent NLRC is MODIFIED such that the private respondent is hereby
directed to pay the petitioner backwages from June 13, 1996 up to the finality of this judgment.14

The petitioner’s motion for reconsideration was denied by the Court of Appeals in its Resolution dated February 14,
2002.

The petitioner assails the decision of the CA in this Court, contending that:

...

[The] Hon. Court of Appeals (Special Eight Division) Gravely Abused Its Discretion And Authority Amounting
To Without Or In Excess Of Jurisdiction When It Reviewed The Final Decision Of The Hon. NLRC And
Refused To Hear The Side Of TCMC That The Appeal In This Case Was Filed out of Time As The decision
Of The Hon. NLRC Is Final Already.

...

[The]Hon. Court of Appeals (Special Eight Division) gravely Abused Its Discretion And Authority Amounting
To Without Or In Excess Of Jurisdiction When It entertained The Petition For Certiorari Which Was Filed
Beyond The Sixty (60) Day Period From Receipt Of The Order-Denying the Motion For Reconsideration And
Refused To Hear The Point Raised By TCMC That [The] Subject Petition Was Filed Beyond The Sixty (60)
Day Period For The Filing Of The Petition For Certiorari.

...

[The] Hon. Court of Appeals (Special Eight Division) Gravely Abused Its Discretion And Authority When It
Disregarded The Evidence In The Record When It Modified, Altered And Changed The Final Decision Of
The Hon. National Labor Relations Commission To Justify The Award Of Backwages. Which Included Even
The Period When Respondent Natividad Were In Jail For Three Times.

...

[The] Hon. Court of Appeals (Special Eight Division) Gravely Abused Its Discretion And Authority When It
Knowingly Rendered A Decision Which Is Bias. Unfair & Unjust, A Violation Of Art. 205 Of The Revised
Penal Code In Relation To Sec (2) (E) Of RA 3019 (Anti-Graft Law) Hence The Decision Is Void.15

The petitioner avers that the Court of Appeals committed a grave abuse of its discretion amounting to excess or lack
of jurisdiction when it gave due course to the private respondent’s petition for certiorari and modified the decision of
the NLRC. According to the petitioner, when the private respondent filed his petition with the CA, the decision of the
NLRC had already become final and executory; thus, the said petition was filed out of time. Furthermore, the
petitioner cannot be lawfully compelled to pay backwages for the period of time that the private respondent was in
jail on account of his violation of the Dangerous Drugs Act, from June 10, 1996 up to July 5, 1996, and from
November 21, 1996 up to February 17, 1997. It contends that the decision of the CA is void for being biased, unjust
and that the issuance of the same is a felony under Article 205 of the Revised Penal Code, as well a crime under
Section 2(e) of Rep. Act No. 3019, also known as the Anti-Graft and Corrupt Practices Act.

In his Comment on the petition, the private respondent avers that the petitioner failed to comply with Section 4, Rule
45 in relation to Section 2, Rule 42 of the Rules of Court, and that the petition was filed out of time. He maintains
that his petition for certiorari with the CA was timely filed and that the decision of the CA is in accord with law.

The issues for resolution may be synthesized, thus: (a) whether the private respondent is proscribed from filing a
petition for certiorari for the nullification of the decision of the NLRC, and its resolution denying his motion for
reconsideration; (b) whether the said petition in the CA was filed on time; (c) whether the petition at bar was filed
Labor II – 1
beyond the fifteen-day period in Section 2, Rule 45 of the Rules of Court, as amended; and (d) whether the CA
committed a grave abuse of discretion amounting to excess or lack of jurisdiction when it modified the decision of
the NLRC and ordered the petitioner to pay backwages to the private respondent.

Anent the first ground, the petitioner asserts that under Article 223 of the Labor Code, as amended, the decision of
the Labor Arbiter/NLRC shall become final after ten (10) days from receipt of the decision. The decision of the NLRC
had become final and executory on November 30, 2000, but the private respondent filed his petition
for certiorari with the CA only on January 16, 2001, long after the NLRC decision had become final and executory.
The petitioner contends that the private respondent was thus proscribed from filing his petition with the CA. Even if
the private respondent was not so barred from filing his petition, still the same was filed beyond the sixty-day period
under Rule 65, Section 4 of the Rules of Court, as amended.

The petitioner’s contentions have no merit.

Article 223 of the Labor Code, as amended, states inter alia:

ART. 223. Appeal. – Decisions, awards, or orders of the Labor Arbiter are  final and executory unless appealed
to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or
orders.16

Clearly, Article 223 of the Labor Code applies only to appeals, from awards or final orders of the Labor Arbiter to the
NLRC and not to appeals from the decisions, awards or orders of the NLRC to the Court of Appeals. Under Article
222 of the Labor Code, a decision of the NLRC shall be final after ten (10) calendar days from receipt thereof by the
petitioner. The private respondent received the decision on January 13, 1999 and had until January 23, 1999 to
perfect his appeal with the NLRC. Thus, the private respondent seasonably appealed to the NLRC. The petitioner
failed to prove its claim that its copy of the appeal of the private respondent was mailed to it on a later date.

Irrefragably, the decision of the NLRC became final and executory on November 17, 2000 when the private
respondent filed his petition with the CA on January 16, 2001. However, the private respondent was not proscribed
from filing a petition for certiorari within a period of sixty days from the notice of the NLRC’s denial of his motion for
the reconsideration of the decision of the NLRC under Section 1, rule 65 of the Rules of Court. If the CA grants the
petition and nullifies the decision of the NLRC on the ground of grave abuse of discretion amounting to excess or
lack of jurisdiction, the decision of the NLRC is, in contemplation of law, null and void ab initio; hence, the decision
never became final and executory.

Anent the second ground, the petitioner insists that the private respondent’s petition with the Court of Appeals was
filed out of time because its copy of the petition was not verified and the assailed decisions and resolutions were not
attached thereto. The petitioner asserts that since the petition was defective in form, the filing thereof in the CA did
not suspend the 60-day period under Section 1, Rule 65 of the Rules of Court.

This contention is, likewise, erroneous.

In its Resolution17 dated February 14, 2002, the Court of Appeals resolved the following issues:

This petition was filed at 3:04 p.m. on January 16, 2001, as shown by the stamp of receipt on the upper right corner
of its first page. The docketing and other legal fees were likewise paid at the same time. Hence, there is no question
that the petition was timely filed.

Had the respondent-movant’s counsel examined the record, he would have found out that the petition is properly
verified, with the Certification/Verification duly notarized on January 16, 2001. The original of the registry receipts
are attached to page 13 of the petition. All the other necessary annexes are likewise attached to the petition. In view
thereof, there is absolutely no reason for us not to receive and act thereon. The malicious insinuation of the counsel
that we have have (sic) another rule for this case is therefore uncalled for.18

Labor II – 1
We agree with the Court of Appeals. We have reviewed the petition with the Court of Appeals and the annexes
thereof. We confirm the verisimilitude of the resolution of the CA that the petition of the private respondent was
sufficient in form and substance.

On the next issue, the petitioner contends that the CA committed a grave abuse of its discretion amounting to
excess or lack of jurisdiction in modifying the decision of the NLRC. It asserts that the decision of the CA modifying
the decision of the NLRC and ordering it to pay backwages to the private respondent is a nullity.

The private respondent, for his part, avers that the proper remedy to assail the decision of the CA was to file a
petition for review on certiorari in this Court under Rule 45 of the Rules of Court within fifteen (15) days from receipt
of notice of the CA resolution denying the petitioner’s motion for reconsideration. However, the petitioner filed a
petition with this Court under Rule 65, dated April 2, 2002, well beyond the fifteen-day period counted from February
21, 2002 when the petitioner received the copy of the assailed Resolution of the CA.

We agree that the remedy of the aggrieved party from a decision or final resolution of the CA is to file a petition for
review on certiorari under Rule 45 of the Rules of Court, as amended, on questions of facts or issues of law within
fifteen days from notice of the said resolution. Otherwise, the decision of the CA shall become final and executory.
The remedy under Rule 45 of the Rules of Court is a mode of appeal to this Court from the decision of the CA. It is a
continuation of the appellate process over the original case. A review is not a matter of right but is a matter of
judicial discretion. The aggrieved party, may however, assail the decision of the CA via a petition for certiorari under
rule 65 of the Rules of Court within sixty days from notice of the decision of the CA or its resolution denying the
motion for reconsideration of the same. This is based on the premise that in issuing the assailed decision and
resolution, the CA acted with grave abuse of discretion, amounting to excess or lack of jurisdiction and there is no
plain, speedy and adequate remedy in the ordinary course of law. A remedy is considered plain, speedy and
adequate if it will promptly relieve the petitioner from the injurious effect of the judgment and the acts of the lower
court.19

The aggrieved party is proscribed from filing a petition for certiorari if appeal is available, for the remedies of appeal
and certiorari are mutually exclusive and not alternative or successive.20 The aggrieved party is, likewise barred from
filing a petition for certiorari if the remedy of appeal is lost through his negligence. A petition for certiorari is an
original action and does not interrupt the course of the principal case unless a temporary restraining order or a writ
of preliminary injunction has been issued against the public respondent from further proceeding.21 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.22

In this case, he petitioner must establish that the Court of Appeals acted with grave abuse of discretion amounting to
excess or lack of jurisdiction in ordering it to pay backwages to the private respondent.

The public respondent acts without jurisdiction if he does not have the legal power to determine the case. There is
excess of jurisdiction when the public respondent, being clothed with the power to determine the case, oversteps his
authority as determined by law. There is a grave abuse of discretion where the public respondent acts in a
capricious, whimsical, arbitrary or despotic manner in the exercise of its judgment as to be equivalent to lack of
jurisdiction.23

The petitioner avers that the CA acted with grave abuse of discretion amounting to excess or lack of jurisdiction
when the CA ordered the petitioner to pay backwages to the private respondent from June 13, 1996 until the
judgment of the CA shall have become final and executory. This is because the private respondent was detained
from June 10, 1996 up to July 5, 1996, and from November 21, 1996 to February 17, 1997 for violations of the
Dangerous Drugs Act. The petitioner asserts that it is absurd for the petitioner to pay backwages to the private
respondent while the latter was in jail. The private respondent would thereby be enriching himself at the expense of
the petitioner. The petitioner insists that backwages should not and cannot be awarded to the private respondent,
since it would include that period of time when the latter was in jail. The petitioner relied on the declaration of this
Court in the case of Cathedral School of Technology v. NLRC,24 where it held that when the employee’s dismissal is
for a just cause, there can be no backwages even if she was denied due process, otherwise she would be unjustly
enriching herself at the expense of the employer.25

Labor II – 1
We do not agree.

In Santos v. NLRC,26 we explained the normal consequences of a finding that an employee has been illegally
dismissed, the statutory intent on the matter and nature of the true remedies of reinstatement and payment of
backwages, thus:

The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the employee
becomes entitled to reinstatement to his former position without loss of seniority rights and secondly, the payment of
backwages corresponding to the period from his illegal dismissal up to actual reinstatement. The statutory intent on
this matter is clearly discernible. Reinstatement restores the employee who was unjustly dismissed to the position
from which he was removed, that is, to his status quo ante dismissal, while the grant of backwages allows the same
employee to recover from the employer that which he had lost by way of wages as a result of his dismissal. These
twin remedies-reinstatement and payment of backwages – make the dismissed employee whole who can then look
forward to continued employment. Thus do these two remedies give meaning and substance to the constitutional
right of labor to security of tenure. The two forms of relief are distinct and separate, one from the other. Though the
grant of reinstatement commonly carries with it an award of backwages, the inappropriateness or non-availability of
one does not carry with it the inappropriateness or non-availability of the other. . . .27

The payment of backwages is generally granted on the ground of equity. It is a form of relief that restores the
income that was lost by reason of the unlawful dismissal; the grant thereof is intended to restore the earnings that
would have accrued to the dismissed employee during the period of dismissal until it is determined that the
termination of employment is for a just cause.28 It is not private compensation or damages but is awarded in
furtherance and effectuation of the public objective of the Labor Code. Nor is it a redress of a private right but rather
in the nature of a command to the employer to make public reparation for dismissing an employee either due to the
former’s unlawful act or bad faith.29

The award of backwages is not conditioned on the employee’s ability or inability to, in the interim, earn any
income. While it may be true that on June 11, 1996, the private respondent was detained in Criminal Case No.
5137, the State Prosecutor found no probable cause for the detention of the private respondent and resolved to
dismiss the case. The private respondent has not yet been convicted by final judgment in Criminal Case No. 5251.
Indeed, he is presumed innocent until his guilt is proved beyond reasonable doubt.

In fine, we find and so hold that the Decision of the CA is in accord with law.

IN THE LIGHT OF THE FOREGOING, the petition is DISMISSED.

Labor II – 1
77.) G.R. No. 157907             November 25, 2004

CHRONICLE SECURITIES CORPORATION and ROBERTO COYIUTO, JR., petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. LABOR ARBITER ARIEL C. SANTOS and NEAL H.
CRUZ, respondents.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the Rules of Court seeking to set aside the Decision of the Court of
1 

Appeals dated November 13, 2002 in CA-G.R. SP No. 67933, entitled, "Chronicle Securities Corporation, et al. v.
National Labor Relations Commission, et al.," which denied the Petition for Certiorari and affirmed the February 28,
2 

2001 Order of the National Labor Relations Commission.

3 

The factual antecedents of the present petition are as follows:

Sometime in September 1993, petitioners hired private respondent Neal H. Cruz, who was then the executive editor
of the Today newpaper, as the publicist and the editor in chief of its national daily broadsheet, the Manila Chronicle.
As compensation for his services, private respondent received a monthly compensation of P60,000.00 plus a brand
new car.4

Thereafter, private respondent quit his job with Today to assume the duties and responsibilities as the editor in chief
of the Manila Chronicle. Private respondent went about the task of improving the over-all image of the Manila
Chronicle. He made full use of its color capabilities and introduced new columns and sections. In time, these
initiatives helped improve the financial condition of the Manila Chronicle, boosting circulation and increasing
advertising revenue. 5

However, due to private respondent's role in the publication of a controversial article that was carried by the
newspaper sometime in July 1994, petitioners terminated his services. Consequently, private respondent filed a
complaint for illegal dismissal against herein petitioners.
6

On January 2, 1997, Labor Arbiter Ariel C. Santos rendered a decision holding that private respondent Neal Cruz
7 

was illegally dismissed. The dispositive portion of the Labor Arbiter's decision stated:

WHEREFORE, premises considered, respondent CHRONICLE SECURITIES CORPORATION, ROBERTO

COJIUTO (sic) JR., AND ONOFRE CORPUZ are hereby held guilty of ILLEGAL DISMISSAL and directed to
reinstate complainant to his former position as Editor-in-Chief of Manila Chronicle immediately even pending
appeal without loss of seniority rights and other benefits accruing during the pendency of this case. If
reinstatement is no longer feasible, then, separation pay of one month for every year of service in addition to
full backwages is hereby decreed.

In addition to the above, respondents must comply with the following:

1. Considering that respondents did not interpose any objection to the pleading of complainant that
ownership of the vehicle assigned to him as part of the compensation package when he was lured
by respondents to join the Manila Chronicle, the same is hereby awarded to him.

Labor II – 1
 2. To pay complainant moral damages in the sum of TEN MILLION (P10,000,000.00) PESOS
considering the mental anguish, social shock and besmirched reputation not to mention his near
brush with death due to shame and humiliation.

3. As a correction and example for the public good in order to prevent the repetition of the same to
employees equally situated like complainant, FIVE MILLION (P5,000,000.00) PESOS is hereby
awarded as exemplary damages.

4. Ten percent of all sums owing to complainant is awarded as attorney's fees.

SO ORDERED.

Petitioners appealed the decision with the National Labor Relations Commission (NLRC), which affirmed the labor
arbiter's decision with modification by reducing the moral damages to P500,000.00 and exemplary damages to
P200,000.00.

Petitioners moved for reconsideration, which was denied on September 15, 1998. Petitioners then filed a petition for
8 

certiorari and prohibition with the Court of Appeals. However, the petition was subsequently dismissed on May 4,
1999. 9

Upon the finality of the Court of Appeals' decision, private respondent Neal Cruz filed a Motion for Immediate
Execution of the NLRC's Decision. On October 16, 1999, Labor Arbiter Ariel Santos issued the Writ of
10 

Execution. Petitioners filed a Motion to Quash the writ of execution, which was denied on August 29, 2000.
11  12  13

Petitioners received copy of the Order denying their motion to quash on October 10, 2000. Hence, they had until
October 20, 2000 to file their appeal. However, on October 20, 2000, Friday, at 3:30 p.m., the NLRC suspended
work due to a Luzon wide power blackout.

The following Monday, October 23, 2000, petitioners filed a Manifestation with Urgent Motion to Admit with the
14 

NLRC. Attached to this motion are the petitioners' Notice of Appeal and Memorandum of Appeal. On February 28,
2001, the NLRC denied petitioners' appeal for being filed out of time. Petitioners' Motion for Reconsideration was
15 

likewise denied on August 20, 2001. 16

A petition for certiorari was filed by petitioners with the Court of Appeals. Finding no grave abuse of discretion on
17 

the part of the NLRC, the petition was dismissed on November 13, 2002. Petitioners' Motion for
18 

Reconsideration was likewise denied.

19  20

Hence, this petition for review, assailing the November 13, 2002 Decision and the March 17, 2003 Resolution of the
Court of Appeals on the following alleged errors:

1. That the delay in the filing of petitioners' Appeal with the NLRC was justifiable and purely due to
extraordinary circumstances, without fault on the part of petitioners and;

2. That the enforcement of the assailed resolutions of the Court of Appeals, the NLRC and the Labor Arbiter
would result in the award of a grossly excessive and unconscionable amount to the respondent since the
backwages due him were erroneously computed.

Petitioners claim that they were prepared to file their appeal within the prescribed period, were it not for
circumstances beyond their control. On October 20, 2000, Friday, Romeo A. Blanca, messenger of petitioners'
counsel, left the office at 2:00 p.m. to file the appeal with the NLRC. His itinerary for that afternoon included a trip to
the post office to mail a copy of the appeal to the private respondent, then to the NLRC's office in Bookman Building
in Quezon Avenue, Quezon City for the filing of the appeal. Purportedly, at around 2:30 p.m. of that day, Mr. Blanca
arrived at the Makati City Post Office and was able to send a copy of the Notice of Appeal with Memorandum of
Appeal to adverse counsel by registered mail under Registry Receipt No. 16488. However, when he arrived at the
21 

NLRC at around 3:30 p.m., he was informed by the security guard that, owing to a Luzon-wide power failure, the
NLRC has suspended its operations as early as 12:00 p.m. of that day. Thus, there was no one at the Docket
Labor II – 1
Section to receive the Notice of Appeal and Memorandum. Mr. Blanca then attempted to file the appeal by
registered mail, but post offices were ordered by the Postmaster General to cease operations at 3:30 p.m. that
day. Thus, petitioners were able to file their appeal only the following Monday, October 23, 2000, which resulted in
22 

the dismissal thereof.

Petitioners argue that the peculiar facts surrounding their failure to file their appeal on time warrant a
review of the dismissal of their appeal by the NLRC.

We agree.

The right to appeal is a purely statutory right. Not being a natural right or a part of due process, the right to appeal
may be exercised only in the manner and in accordance with the rules provided therefor. Failure to bring an appeal
within the period prescribed by the rules renders the judgment appealed from final and executory. However, it is
23 

always within the power of this Court to suspend its own rules, or to except a particular case from its operations,
whenever the purposes of justice require it. 24

In not a few instances, we relaxed the rigid application of the rules of procedure to afford the parties the opportunity
to fully ventilate their cases on the merits. This is in line with the time honored principle that cases should be
decided only after giving all parties the chance to argue their causes and defenses. Technicality and procedural
imperfections should thus not serve as bases of decisions. In that way, the ends of justice would be better served.
For indeed, the general objective of procedure is to facilitate the application of justice to the rival claims of
contending parties, bearing always in mind that procedure is not to hinder but to promote the administration of
justice. 25

In Philippine National Bank, et al. v. Court of Appeals, we allowed, in the higher interest of justice, an appeal filed
26 

three days late.

In Republic v. Court of Appeals, we ordered the Court of Appeals to entertain an appeal filed six days after the
27 

expiration of the reglamentary period; while in Siguenza v. Court of Appeals, we accepted an appeal filed thirteen
28 

days late. Likewise, in Olacao v. NLRC, we affirmed the respondent Commission's order giving due course to a
29 

tardy appeal "to forestall the grant of separation pay twice" since the issue of separation pay had been judicially
settled with finality in another case. All of the aforequoted rulings were reiterated in our 2001 decision in the case of
Equitable PCI Bank v. Ku. 30

Moreover, the facts herein are akin to the case of Surigao del Norte Electric Cooperative v. NLRC, where we
31 

upheld the NLRC's order taking cognizance of an appeal filed one day late since the delay in filing was caused by
the onslaught of typhoon Besing, resulting in the closure of the Surigao Post Office on the last day for the appellant
to file her appeal.

Verily, the respondent NLRC's dismissal of the petitioners' appeal in this case failed to consider the valid reasons for
not being able to timely file the same.

Anent the second issue raised by the petitioners, i.e., the matter of the proper computation of the
backwages due the private respondent, we resolve the same in favor of the petitioners. We have gone
through the portions of the records pertinent to the resolution of this issue and we find that the Court of Appeals and
the NLRC committed reversible error in laying down the basis for the computation of private respondent's
backwages.

There is no question that petitioners illegally dismissed private respondent Neal Cruz. Even petitioners themselves
are no longer questioning the findings of the Labor Arbiter and the NLRC on this aspect. Petitioners main concern in
this petition is the proper computation of backwages to be awarded to the private respondent who is rightfully
entitled to the payment of backwages, the only question that remains is how much?

Backwages, in general, are granted on grounds of equity for earnings which a worker or employee has lost due to
his illegal dismissal. It represents compensation that should be earned but was not collected because an employer
32 

Labor II – 1
has unjustly dismissed an employee. Thus, the payment of backwages is a form of relief that restores the income
33 

that was lost by reason of unlawful dismissal. 34

Article 279 of the Labor Code of the Philippines, as amended, provides that:

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. (Underscoring supplied)

Under Republic Act No. 6715, employees who are illegally dismissed are entitled to full backwages, among others,
computed from the time their actual compensation was withheld from them up to the time of their actual
reinstatement. If reinstatement is no longer possible, the backwages shall be computed from the time of their illegal
termination up to the finality of the decision.
35

In the instant case, petitioners are questioning the basis of the Labor Arbiter's computation of private respondent's
backwages as reflected in the August 29, 2000 Order. In the said order, the Labor Arbiter computed the total award
36 

to the respondent as follows:

1. BACKWAGES:
Basic Wage:
9/15/94 – 9/15/2000
P60,000.00 x 72 mos. = P 4,320,000.00
13th Month Pay
1/12 of 4,320,000.00 360,000.00
2. SEPARATION PAY:
(Reinstatement no longer feasible)
10/1/93 – 9/15/2000 = 6 yrs. & 11 mos.
P60,000.00 x 7 yrs. =     P 420,000.00
            TOTAL = P 5,100,000.00
3. ATTORNEY’S FEES
10% of P 5,100,000.00 = P 510,000.00
4. MORAL DAMAGES = 500,000.00
5. EXEMPLARY DAMAGES =       200,000.00
            TOTAL AWARD P 6,310,000.00

Petitioners contend that contrary to established jurisprudence, the Labor Arbiter's computation of the
amount due to the private respondent was principally based on the mistaken premise that complainant was
entitled to backwages even beyond the closure and cessation of petitioners' newspaper business on
January 19, 1998. Petitioners argue that this should not be the case because the amount of backwages
37 

should only be computed from the date of illegal dismissal up to the time when reinstatement was still
possible. Reinstatement could not have been possible beyond the date of the closure of the Manila
Chronicle on January 19, 1998. Therefore, backwages should only be computed from September 15, 1994,
the effectivity of private respondents termination by the petitioners until the date when the Manila Chronicle
ceased publication.

Petitioners further contend that they only had one newspaper business and, with the closure of the same, the
reinstatement of private respondent Neal Cruz to his former position as Editor-In-Chief became a physical and legal
impossibility. Private respondent could not claim that he should have been appointed to another position with the
petitioners because he was hired solely for his editorial skills. There is simply no equivalent or substantially
equivalent position to which private respondent could be assigned in petitioners' organization.38

Labor II – 1
This is not the first time that we resolved an issue of this nature. In the case of Pizza Inn/Consolidated Foods
Corporation v. NLRC, we ruled that:
39 

An employer found guilty of unfair labor practice in dismissing his employee may not be ordered so to pay
backwages beyond the date of closure of business where such closure was due to legitimate business
reasons and not merely an attempt to defeat the order of reinstatement. 40

In the case at bar, the Manila Chronicle ceased publication on January 19, 1998. The cessation of
publication was a permanent one and it was precipitated by the paper's dire financial condition which was
aggravated by a crippling strike causing it to finally shut down. Petitioners' closure of their newspaper
business was made on legal and valid grounds. It was never resorted to as a means to deprive the private
respondent of the opportunity to be reinstated to his former position. To allow the computation of the
backwages due the private respondent to be based on a period beyond January 19, 1998 would be an
injustice to the petitioners.

Our power to exact retribution from erring employers for cases of illegal dismissal should not go beyond what is
recognized as just and fair under the circumstances. While we are inclined more often than not toward the worker
and uphold his cause in his conflicts with his employer, such favoritism has not blinded us to the rule that justice is in
every case for the deserving, to be dispensed in the light of the established facts and the applicable law and
doctrine.41

WHEREFORE, the petition is GRANTED. The November 13, 2002 Decision of the Court of Appeals as well as its
March 17, 2003 Resolution in CA-G.R. SP No. 67933 are SET ASIDE. Respondent National Labor Relations
Commission is DIRECTED to reinstate and give due course to petitioners' appeal for a determination of the amount
of backwages to be paid to private respondent with further instructions to receive or require such further evidence as
may be necessary. Pending the final determination of the correct amount of backwages due the private respondent,
the NLRC is ENJOINED from conducting any enforcement or execution proceedings with respect to NLRC NCR
Case No. 10-07187-94.

Labor II – 1
 78.) [G.R. NO. 152843 : July 20, 2006]

INTERCONTINENTAL BROADCASTING CORPORATION, Petitioner, v. REYNALDO BENEDICTO,

deceased, substituted by his surviving spouse LOURDES V. BENEDICTO, and children,
namely: REYNALDO V. BENEDICTO, SHIRLEY V. BENEDICTO-TAN, EDGAR V. BENEDICTO
and LILIBETH V. BENEDICTO-DE LA VICTORIA,*, Respondents.

DECISION

CORONA, J.:

This is a Petition for Review on Certiorari 1 of the October 18, 2001 decision2 and March 18, 2002
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 53413 which in turn affirmed the March 5,
1999 decision4 and June 10, 1999 resolution5 of the National Labor Relations Commission (NLRC) in
NLRC NCR CA Case No. 017886-99.

Petitioner alleged that Intercontinental Broadcasting Corporation is a government-owned and

controlled corporation.6 It is engaged in the business of mass media communications including,
among others, the operation of television Channel 13 (IBC 13).7

In 1993, Reynaldo Benedicto was appointed by Ceferino Basilio, the general manager8 then of
petitioner, as marketing manager with a monthly compensation of P20,000 plus 1% commission from
collections of all advertising contracts consummated.9

In a letter dated October 11, 1994 signed by Tomas Gomez III, at that time the president of
petitioner, Benedicto was terminated from his position.10

On December 3, 1996, Benedicto filed a complaint with the NLRC for illegal dismissal and damages.
He alleged that after his appointment, he was able to increase the televiewing, listening and audience
ratings of petitioner which resulted in its improved competitive financial strength.11 Specifically, in
1994, he claimed that he successfully initiated, pursued and consummated an advertising contract
with VTV Corporation for a period of five years involving the amount of P600 million.12 However, on
October 11, 1994, he was terminated from his position without just or authorized cause.

Labor arbiter Jovencio LL. Mayor, Jr.,13 in a decision dated August 17, 1998, ruled in favor of
Benedicto finding that he was indeed illegally dismissed. Consequently, Mayor: (1) ordered his
reinstatement with full backwages from the time of his dismissal up to his actual reinstatement
(amounting to P920,000 at the time of the promulgation of the decision); (2) directed petitioner to
pay his 1% commission on the contract with VTV Corporation (P645,000), attorney's fees in the
amount of 10% of the total award (P156,500) and (3) dismissed the claim for moral and exemplary
damages.14

Finding the award excessive, petitioner, on October 15, 1998, filed with the NLRC its memorandum
on appeal with motion to re-compute the award on which the appeal bond was to be based.15 This
motion was not acted upon,16 hence, on December 10, 1998, petitioner proceeded to file the appeal
bond based on the amounts17 awarded in the judgment appealed from.18

In a decision promulgated on March 5, 1999, the NLRC dismissed the appeal and ruled that petitioner
failed to perfect its appeal since it did not file the appeal bond within the reglementary period. The
CA affirmed the NLRC's decision.

Thus this petition with application for preliminary injunction and/or temporary restraining order
alleging the following assignment of errors:
Labor II – 1
I. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING THE ASSAILED DECISION/RESOLUTION OF
THE [NLRC] ON MERE TECHNICALITY, FAILING TO RECOGNIZE THAT PETITIONER HAS IN FACT
PERFECTED ITS APPEAL UNDER EXISTING LAW AND JURISPRUDENCE[;]

II. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED
RESOLUTION/DECISION DEPRIVING PETITIONER OF ITS RIGHT TO APPEAL, BY IGNORING THE
MERITS OF THE MOTION TO RECOMPUTE AWARD TO REDUCE BOND AND ITS SIGNIFICANCE IN
RELATION TO THE PERFECTION OF THE APPEAL[;]

III. WITH DUE RESPECT, THE [CA] ERRED IN NOT PASSING UPON THE SUBSTANTIVE MERITS OF
THE CASE, SPECIALLY ON THE VALIDITY OF THE REINSTATEMENT OF [BENEDICTO] AT AGE
SEVENTY TWO (72), CONTRARY TO LAW AND JURISPRUDENCE, AND THE GRANT OF BACKWAGES
BEYOND [THE] AGE FOR COMPULSORY RETIREMENT AT 65[;]

IV. WITH DUE RESPECT, THE [CA] ERRED IN AFFIRMING IN TOTO THE ASSAILED
RESOLUTION/DECISION THAT GRANTS 5-YEAR AUTOMATIC INCREASE OF AWARD [SUCH] AS
FROM P1.565M TO 2.711M WITHOUT SETTING [BENEDICTO]'S MOTION TO RECOMPUTE AWARD FOR
HEARING AND WITHOUT DUE NOTICE THEREOF DEPRIVING THE PETITIONER OF ITS PROPERTY
WITHOUT DUE PROCESS[;]

V. THE [CA] ERRED IN IGNORING THE ISSUE OF JURISDICTION RAISED BY PETITIONER.19

On June 26, 2002, this Court issued a temporary restraining order enjoining Benedicto and the NLRC
from implementing the decision of labor arbiter Mayor.20

During the pendency of the case, on November 6, 2002, Benedicto passed away.21 He was
substituted by his surviving spouse Lourdes V. Benedicto and their four children.22

After this petition was given due course, Atty. Rodolfo B. Barriga, who claimed to have been hired by
Benedicto as collaborating counsel, filed a motion dated December 17, 2002 praying to be reinstated
as counsel of record of respondents.23 The Court, in a resolution dated March 26, 2003, denied the
motion since any attorney-client relationship between him and Benedicto, if it indeed existed, was
terminated by the latter's death. Thereafter, Atty. Barriga filed a motion to determine attorney's fees
and notice and statement of charging lien for attorney's fees dated May 5, 2003 praying, among
others, that we determine and approve his attorney's fees and approve the notice of his charging
lien.24

Now the resolution of the issues.

Petitioner raises the issue of jurisdiction without, however, explaining properly the basis of its
objections.25 Such half-hearted and belated attempt to argue the NLRC's alleged lack of jurisdiction
cannot possibly be taken seriously at this late stage of the proceedings.

The NLRC and the CA dismissed petitioner's appeal. Both held that petitioner failed to perfect its
appeal. Petitioner had ten calendar days from its receipt of the labor arbiter's decision on October 5,
1998 to appeal. While it filed its memorandum on appeal with motion to re-compute award on
October 15, 1998, the appeal bond was posted after the appeal period.

Under the second paragraph of Article 223 of the Labor Code, when a judgment involving monetary
award is appealed by the employer, the appeal is perfected only upon the posting of a cash or surety
bond  issued by a reputable bonding company duly accredited by the NLRC in an amount equivalent
to the monetary award in the judgment. This assures the workers that if they finally prevail in the
case, the monetary award will be given to them on dismissal of the employer's appeal.26 It is also

Labor II – 1
meant to discourage employers from using the appeal to delay or evade payment of their obligations
to the employees.27

Nevertheless, such amount of the bond may be reduced by the NLRC in meritorious cases, on motion
of the appellant.28 Indeed, an unreasonable and excessive amount of bond is oppressive and unjust,
and has the effect of depriving a party of his right to appeal.29

The provision of Article 223 of the Labor Code requiring the posting of a bond for the perfection of an
appeal of a monetary award must be given liberal interpretation in line with the desired objective of
resolving controversies on the merits.30 If only to achieve substantial justice, strict observance of the
reglementary periods may be relaxed if warranted.31 However, this liberal interpretation must be
justified by substantial compliance with the rule. As we declared in Buenaobra v. Lim King Guan:32

It is true 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 perfect an appeal has the effect of making the
judgment final and executory. However, technicality should not be allowed to stand in the way of
equitably and completely resolving the rights and obligations of the parties. We have allowed appeals
from the decisions of the labor arbiter to the NLRC, even if filed beyond the reglementary period, in
the interest of justice.33

In this case, petitioner posted the bond when the NLRC did not act on its motion for re-computation
of the award. There was thus substantial compliance that justified a liberal application of the
requirement on the timely filing of the appeal bond. Moreover, petitioner presented a meritorious
ground in questioning the computation of the backwages, as we shall discuss below.

We now proceed to the merits of the case.

The labor arbiter found that Benedicto was an employee (the marketing manager) of petitioner.34 He
also determined that there was no just or authorized cause for Benedicto's termination. Neither did
petitioner comply with the two-notice requirement for valid termination under the law. He therefore
concluded that Benedicto was illegally dismissed.35

These factual findings of the NLRC, confirmed by the CA, are binding on us since they are supported
by substantial evidence. Petitioner, aside from merely stating that Benedicto's appointment was
unauthorized,36 did not extensively deal with the issue of whether Benedicto was in fact its employee.
Besides, it is estopped from denying such fact considering its admission that its former President,
Tomas Gomez III, wrote him a letter of termination on October 11, 1994.37 Petitioner, furthermore,
never contested the finding of illegal dismissal. Accordingly, there are no strong reasons for us to
again delve into the facts.

Instead, the bulk of petitioner's arguments focused on the labor arbiter's order of reinstatement and
award of backwages. The issue of reinstatement was mooted by Benedicto's death in 2002.

As for the award of backwages, petitioner insists that the award should be limited to what Benedicto
was entitled to as of the compulsory retirement age of 65 years. When the labor arbiter promulgated
his decision (wherein he awarded the amount of P920,000 as backwages), Benedicto was already 68
years old. In an order dated August 10, 1999, he further increased the backwages by P180,000.38

We agree with petitioner that Benedicto was entitled to backwages only up to the time he reached 65
years old, the compulsory retirement age under the law.39 When Benedicto was illegally dismissed on
October 11, 1994, he was already 64 years old. He turned 65 years old on December 1, 199440 at
which age he was deemed to have retired. Since backwages are granted on grounds of equity for
earnings lost by an employee due to his illegal dismissal,41 Benedicto was entitled to backwages only

Labor II – 1
for the period he could have worked had he not been illegally dismissed, i.e. from October 11, 1994
to December 1, 1994.42

Petitioner also questions the award by the labor arbiter of Benedicto's 1% commission on the
blocktime sale agreement with VTV Corporation in the amount of P645,000.43 The arbiter found that
the agreement was initiated by and consummated through Benedicto's efforts and that he was
entitled to the commission.44 This is another factual matter that is binding on us. However, it is
unclear how the labor arbiter arrived at the amount adjudged. We therefore rule that in computing
the amount of the commission Benedicto was entitled to, the following should be considered:

First, because Benedicto was entitled to backwages only from October 11 to December 1, 1994 when
he turned 65 years old, petitioner should pay his commission only for this period.

Second, by nature, commissions are given to employees only if the employer receives
income.45 Employees, as a reward, receive a percentage of the earnings of the employer, which they,
through their efforts, helped produce.46 Commissions are also given in the form of incentives or
encouragement so that employees will be inspired to put a little more industry into their tasks.
Commissions can also be considered as direct remunerations for services rendered.47 All these
different concepts of commissions are incongruent with the claim that an employee can continue to
receive them indefinitely after reaching his mandatory retirement age.

Benedicto's right to the commissions was coterminous with his employment with petitioner48 and this
ended when he reached the compulsory retirement age.

Lastly, the stipulation49 providing for commissions (which did not specify the period of entitlement)
would be too burdensome if interpreted to mean that Benedicto had a right to it even after his
employment with petitioner. Doubts in contracts should be settled in favor of the greatest reciprocity
of interests.50 A lopsided and open-minded construction could not have been the parties'
contemplation. Had that been their intent, then they should have spelled it out in no uncertain terms.

The labor arbiter should therefore re-compute the commission Benedicto was entitled to in
accordance with these guidelines.

Petitioner is also liable for 10% of the total amount for attorney's fees since Benedicto and the
present respondents were compelled to litigate and incur expenses to enforce and protect his rights.51

With respect to Atty. Barriga's motion, we note that this entails a factual determination and
examination of the evidence. Since Atty. Barriga still has to prove his entitlement to the attorney's
fees he is claiming and the amount thereof (if he is so entitled), this may be taken up in the NLRC
which will execute the judgment.52

In summary, this case shall be remanded to the labor arbiter for re-computation of backwages and
commissions to be paid by petitioner to respondent(s) for the period October 11, 1994 to December
1, 1994 and 10% of the total amount as attorney's fees. The labor arbiter shall also set for further
hearing Atty. Barriga's motion to determine his attorney's fees and thereafter to fix the amount
thereof if he is so entitled.

WHEREFORE, the assailed decision dated October 18, 2001 and resolution dated March 18, 2002 of
the Court of Appeals in CA-G.R. SP No. 53413 are hereby REVERSED and SET ASIDE.

Petitioner is ORDERED to pay the deceased respondent's backwages and commissions to his heirs
from the time he was illegally dismissed on October 11, 1994 up to the time he reached compulsory
retirement age on December 1, 1994. Likewise, petitioner is ORDERED to pay attorney's fees

Labor II – 1
equivalent to 10% of the total monetary award (backwages plus commissions). For this purpose, the
case is hereby ordered REMANDED to the labor arbiter for the re-computation of the amounts due.

The labor arbiter is also DIRECTED to set for further hearing Atty. Rodolfo B. Barriga's motion to
determine his attorney's fees and thereafter to fix the amount thereof if due to him.

Our temporary restraining order issued on June 26, 2002 is hereby LIFTED.

Labor II – 1
79.) G.R. No. 161694             June 26, 2006

PEPITO VELASCO, Petitioner,
vs.
NATIONAL LABOR RELATIONS, and COMMISSION, ANTONIO TAYAG, ERNESTO TAYAG and RODOLFO
TAYAG, Respondents.

DECISION

TINGA, J.:

There is little difficulty on the part of the Court in upholding the rulings challenged in this Petition for Review and
confirming the finding that private respondents in this case were illegally dismissed. Further, it is clear that private
respondents should be awarded full backwages, an entitlement denied them even as they were granted separation
pay in lieu of reinstatement. We affirm, subject to modification on the matter of backwages.

Petitioner Pepito Velasco (Velasco) is the owner-manager of Modern Furniture Manufacturing (Modern
Furniture).1 Private respondent Ernesto Tayag was hired as a carpenter by Velasco and Modern Furniture in 1968,
while his relatives, co-private respondents Antonio Tayag and Rodolfo Tayag, were hired in the same capacity in
1970. All three were paid on a piece-rate basis.2

According to the Tayags, in 1998, Velasco and Modern Furniture started laying off workers due to business losses,
albeit with the promise to the dismissed workers that they would be rehired should the business again prosper.
Purportedly, Antonio and Ernesto Tayag were laid off in December of 1999, while Rodolfo Tayag was dismissed in
May of 2000.3 All three filed complaints for illegal dismissal against Modern Furniture and Velasco with the National
Labor Relations Commission, Regional Arbitration Branch No. III, based in San Fernando, Pampanga.4 The Tayags
sought separation pay in lieu of reinstatement, as well as 13th month pay, holiday pay, overtime pay, and exemplary
damages.5

Velasco and Modern Furniture have a different version. They claimed that while they had indeed suffered business
losses in 1998, causing them to lay off some workers, they subsequently agreed with their employees, including the
Tayags, to pay wages on a piece-rate basis. In the first part of the year 2000, Ernesto Tayag inexplicably stopped
reporting to work. In June of that year, Antonio and Rodolfo Tayag also stopped reporting for work.6 Velasco claimed
that he next heard from the three when he was served summons in the instant case.7 It was thus argued that the
Tayags were not actually terminated, but instead had abandoned their work.

After the complaints of the Tayags were consolidated, Labor Arbiter Eduardo J. Carpio rendered a Decision dated
15 September 2000 dismissing the complaints for illegal dismissal. The Labor Arbiter reasoned that since Velasco
and Modern Furniture had denied terminating the employees in the first place, the burden fell upon the Tayags to
prove by substantial evidence that they were actually terminated.8 The Labor Arbiter concluded that the contentions
of the Tayags of dismissal were unsubstantiated, and thus he dismissed the complaints.

On appeal, the NLRC set aside the Decision of the Labor Arbiter in its Resolution dated 26 March 2002.9 The NLRC
held that the Labor Arbiter had misappreciated the facts of the case. It was noted that Velasco and Modern
Furniture had admitted that since the Tayags were paid on a per piece basis, they were not required to go to the
work place. In fact, the Tayags were only required to report for work when new job orders came in and they were
called upon by Velasco and Modern Furniture. The NLRC found that there was no instance from the evidence
adduced wherein Velasco or Modern Furniture called upon the Tayags to report for work.10 From these facts, the
NLRC concluded that the Tayags had not reported to the premises of Modern Furniture simply because they were
not given any work, as in fact they had actually been dismissed. Thus, the NLRC did not agree with the contention
that the Tayags had abandoned work, and concluded instead that they were entitled to separation pay in lieu of
reinstatement. Nonetheless, the other monetary claims of the Tayags were dismissed for lack of merit.11

Velasco filed a Petition for Certiorari and Prohibition with the Court of Appeals, assailing the Resolution of the
NLRC. In a Decision12 dated 30 September 2003, the Court of Appeals sustained the NLRC and dismissed the

Labor II – 1
petition. The appellate court agreed that it was Velasco, as employer, who had the burden to prove that the
termination was for just or authorized causes, and that Velasco had failed to overcome such burden.13 The Court of
Appeals also deemed the award of separation pay as proper, with the finding of illegal dismissal and separation pay
being a proper alternative remedy should reinstatement be no longer possible.14

Hence this petition, brought forth after the Court of Appeals had denied Velasco’s Motion for Reconsideration.15 The
crux of Velasco’s arguments before this Court rests on one sentence in the Resolution of the NLRC, which states:

Viewed in this light, the relief available to complainants-appellants is reinstatement without backwages there being
no showing also that there was illegal dismissal.16

Velasco argues that since the NLRC had concluded that there was no illegal dismissal, the Court of Appeals erred in
concluding instead that the Tayags were illegally dismissed.17 From the same premise, Velasco also claims that the
Court of Appeals also erred in granting separation pay, considering the alleged finding of the NLRC that there was
no illegal dismissal.18

The proper perspective should be asserted. This being an appeal by certiorari under Rule 45 from a decision of the
Court of Appeals, the petitioner must be able to establish an error of law imputable to the Court of Appeals, since it
is the decision of that court that is primarily reviewed by this Court. In short, the petitioner must stake the petition on
the position that in error was the Court of Appeals itself, rather than the agencies below.

In the case at bar, Velasco claims that the Court of Appeals erred in ruling that the Tayags were illegally dismissed
because the NLRC had purportedly concluded otherwise. We are not persuaded.

We have examined the entirety of the Resolution of the NLRC, as well as the controversial sentence. The phrase
"there being no showing also that there was illegal dismissal" is clearly off-tangent with the rest of the Resolution, as
well as the dispositive portion thereof.

The Resolution of the NLRC is eight (8) pages long. It devoted the first four (4) pages to the factual narrative and a
summary of the ruling of the Labor Arbiter. The Resolution then proceeded to discuss the position of the Labor
Arbiter that with Velasco’s counter-allegation of abandonment the burden of proof shifted to the Tayags to establish
by substantial evidence that they were terminated by Velasco. On this point, the NLRC concluded that "[the Tayags’
opposing] contention has merit."19 The NLRC then proceeded to cite the legal doctrines on abandonment, including
a statement that the burden of proof was on the employer to show an unequivocal intent on the part of the employee
to discontinue employment.20

We now quote the next three pages of the Resolution, culminating in the paragraph containing the controverted
passage:

In this case, complainants-appellants Antonio and Ernesto Tayag contend that they were laid off in December 1999,
while complainant-appellant Rodolfo Tayag was laid-off in May, 2000 and that respondents-appellees promised to
recall them as soon as business gets better. On the other hand, respondents-appellants contend that complainant-
appellant Ernesto Tayag voluntarily did not come to the work premises for about six (6) months or since February,
2000; that in June, 2000, complainants-appellants Antonio and Rodolfo Tayag likewise for no apparent reason failed
to report at respondents-appellees’ premises. Moreover, respondents-appellees repeatedly assert that:

"Apparently, complainants-appellants are being paid on a per piece basis and not required to go to the work place,
they have the liberty to go or not to go to the work place and therefore, they cannot claim to have been illegally
dismissed if respondent-appellee does not notify or call them for work. It should also be noted that the
complainants-appellants work is based on orders received by the respondent-appellee, thus, if there are no work
orders, they have no work. Furthermore, herein complainants-appellants are not the only workers engaged by
herein respondent-appellee, thus work orders are usually divided among them and if there are only few orders,
other workers would have no work." (p. 55, Records)

From the foregoing, it is clear that complainants-appellants only go to work when there are orders that need
to be done and when they are called upon by respondents-appellees. The choice to call complainants-

Labor II – 1
appellants rests on respondents-appellees, so the latter has no basis to complain that complainants-
appellants failed to appear at the work premises. From the evidence adduced, there was no instance where
respondents-appellees called upon complainants-appellants to report for work because there are orders to
be done and the latter refused. What respondents-appellees are merely saying is that complainants-
appellants had voluntarily failed to go to the premises. Clearly, the reason why complainants-appellants do
not appear at the work premises is the fact that they are not called upon to do work pursuant to their
alleged agreement of paying by payment rate basis. It is undisputed that since early 2000, complainant-
appellant Ernesto Tayag was not given work while complainants-appellants Antonio and Rodolfo

Tayag were not also given work since May, 2000. Hence, complainants-appellants believed and concluded
that they were laid off. Having worked for more than thirty (30) years with respondents-appellees, Antonio Tayag
and Ernesto Tayag are both fifty-five (55) years of age while Rodolfo Tayag is forty-six (46) years old. We can thus
safely conclude that another reason why respondents-appellants do not call upon them to work is because of their
having become old. Verily, respondents-appellees’ assertion that complainants-appellants abandoned their
work have no factual basis. We note that even during the hearing of this case until the Decision was issued,
there has been no offer of work made by respondents-appellees to complainants-appellants.

Viewed in this light, the relief available to complainants-appellants is reinstatement without backwages
there being no showing also that there was illegal dismissal. However, it is clear that respondents-appellees
are no longer interested in calling complainants-appellants back to work because of the financial difficulty of the
business and that complainants-appellants on the other hand, are asking for separation pay. Such being the case,
separation pay in lieu of reinstatement without backwages is the proper relief in the instant case.21

Reading the entire Resolution, it is beyond doubt that the NLRC concluded that Velasco had failed to establish that
the Tayags had abandoned their employment. Such conclusion is crucial, Velasco’s defense against the charge of
illegal dismissal being that the Tayags had actually abandoned their employment, which is recognized in
jurisprudence as a form of neglect of duty one of the just causes for dismissal under Article 282 of the Labor
Code.22 The disquisition is also relevant, as it debunks the Labor Arbiter’s contention that it fell upon the Tayags to
establish that they had been illegally dismissed. Instead, the NLRC correctly held that the burden was upon Velasco
to substantiate his claim that the Tayags had abandoned their employment.

Further, the NLRC concluded that the Tayags had stopped reporting to the premises of Modern Furniture because
Velasco and Modern Furniture had stopped assigning them work. Considering that the Tayags were paid on a per-
piece basis, it necessarily followed that they stopped receiving income as well. The NLRC even hazarded a theory
that Velasco had stopped giving the Tayags work because of their age. Thus, the NLRC stated: "Verily,
respondents-appellees’ assertion that complainants-appellants abandoned their work have no factual basis."23

Given the context of the preceding discussion, which illustrated that the Tayags were not guilty of abandonment,
there is no legal basis whatsoever for the conclusion that "there was no showing x x x that there was illegal
dismissal." It is not clear why the NLRC stated that there was "no showing also that there was illegal dismissal"
when its preceding discussion so obviously pointed to the contrary. Yet when it is clear that the cited passage
cannot stand with the rest of the decision, including the dispositive portion, the Court cannot obviously confer
binding effect on the conclusion that there was no illegal dismissal, as it runs contrary against the grain of the rest of
the Resolution.

Indeed, the dispositive portion of the Resolution clearly supports the premise that the Tayags were illegally
dismissed, there being an award of separation pay in lieu of reinstatement.

WHEREFORE, premises considered, the appeal is partly GRANTED and the Decision dated 15 September 2000
finding that complainants-appellants simply did not report for work or were the ones who abandoned their work is
hereby ordered SET ASIDE. A new Decision is hereby issued ordering respondents-appellees to award
complainants-appellants separation pay in lieu of reinstatement computed at one-half (1/2) month pay for every year
of service computed as follows:

1) Antonio Tayag

Separation Pay:
Labor II – 1
 From 1970 to May 2000 = 30 yrs.

P1,200.00 x 4 wks x 30 yrs. x ½ mo. P72,000.00

2) Ernesto Tayag

Separation Pay:

From 1968 to Dec. 1999 – 31 yrs.

P1,500.00 x 4 wks. X 31 yrs. x ½ mo. P93,000.00

3) Rodolfo Tayag

Separation Pay:

From 1970 to May 2000 = 30 yrs.

P1,500.00 x 4 wks. x 30 yrs. x ½ mo. P90,000.00

GRAND TOTAL P255,000.00

SO ORDERED.24

Under Article 279 of the Labor Code, an employee unjustly dismissed from work is entitled to reinstatement and
backwages, among others. However, it has long been recognized that if reinstatement is no longer possible or
practicable, the employer may be made instead to pay separation pay to the employee in lieu of reinstatement.25 The
dispositive portion of the Resolution is consistent with the premise that the Tayags were entitled to reinstatement by
reason of their illegal dismissal, but they could receive instead separation pay in lieu of reinstatement if
reinstatement is no longer practicable. The dispositive portion does not hew to a mindset that the Tayags were not
illegally dismissed, the thinking which Velasco wishes to ascribe on the NLRC. It is derived instead from the
conclusion that the Tayags were illegally dismissed, a conclusion that may contradict the cited passage of the NLRC
Resolution, but not the tenor and findings of the Resolution in its entirety.

Other than the erroneous contention that the NLRC had concluded that there was no illegal dismissal, Velasco’s
only remaining argument is that the payment of separation pay was "misplaced, since no evidence as to the
necessity thereof was presented." Velasco cites the Court’s comment in Quijano v. Mercury Drug Corp.26 that "the
doctrine of strained relations should be strictly construed x x x Every labor dispute almost always results in ‘strained
relations’, and the phrase cannot be given an over-arching interpretation x x x x27

In Quijano, it was the employer who was seeking that the employee be granted separation pay instead of
reinstatement, while in this case Velasco consistently argued against the award of separation pay. Of course,
following Velasco’s logic, the Tayags should instead be reinstated. Nonetheless, the Court finds no reason to disturb
the ruling that the Tayags should be awarded separation pay in lieu of reinstatement. The cited remarks of the Court
in Quijano were made in the context of pointing out that "[s]ome unscrupulous employers x x x have taken
advantage of the overgrowth of this doctrine of ‘strained relations’ by using it as a cover to get rid of its employees
and thus defeat their right to job security."28

The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no longer practical
or in the best interest of the parties.29 Separation pay in lieu of reinstatement may likewise be awarded if the
employee decides not to be reinstated.30 It is not controverted that Modern Furniture has undergone financial
hardship, and that the Tayags had opted to seek separation pay in lieu of reinstatement. We defer to the findings of
the NLRC, as affirmed by the Court of Appeals and authorized under jurisprudence, that separation pay in lieu of
reinstatement is warranted in this case.

Labor II – 1
Finally, the Tayags argue in their Memorandum before this Court that the NLRC and Court of Appeals had erred in
not awarding them full backwages.31 The NLRC, while awarding separation pay to the Tayags, held that they had
failed to establish sufficient factual basis for their other monetary claims.32 The Court of Appeals remained silent on
that aspect.

The Tayags are correct in pointing out that they are entitled to full backwages by reason of their illegal dismissal,
notwithstanding the award of separation pay. The Court made this point clear in Santos v. NLRC.33

The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the employee
becomes entitled to reinstatement to his former position without loss of seniority rights and, secondly, the payment
of backwages corresponding to the period from his illegal dismissal up to actual reinstatement. The statutory intent
on this matter is clearly discernible. Reinstatement restores the employee who was unjustly dismissed to the
position from which he was removed, that is, to his status quo ante dismissal, while the grant of backwages allows
the same employee to recover from the employer that which he had lost by way of wages as a result of his
dismissal. These twin remedies—reinstatement and payment of backwages—make the dismissed employee whole
who can then look forward to continued employment. Thus do these two remedies give meaning and substance to
the constitutional right of labor to security of tenure. The two forms of relief are distinct and separate, one from
the other. Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness or non-availability
of the other. Separation pay was awarded in favor of petitioner Lydia Santos because the NLRC found that her
reinstatement was no longer feasible or appropriate. As the term suggests, separation pay is the amount that an
employee receives at the time of his severance from the service and, as correctly noted by the Solicitor General in
his Comment, is designed to provide the employee with "the wherewithal during the period that he is looking for
another employment." In the instant case, the grant of separation pay was a substitute for immediate and
continued re-employment with the private respondent Bank. The grant of separation pay did not redress the
injury that is intended to be relieved by the second remedy of backwages, that is, the loss of earnings that
would have accrued to the dismissed employee during the period between dismissal and reinstatement. Put
a little differently, payment of backwages is a form of relief that restores the income that was lost by reason
of unlawful dismissal; separation pay, in contrast, is oriented towards the immediate future, the transitional
period the dismissed employee must undergo before locating a replacement job. It was grievous error
amounting to grave abuse of discretion on the part of the NLRC to have considered an award of separation pay as
equivalent to the aggregate relief constituted by reinstatement plus payment of backwages under Article 280 of the
Labor Code. The grant of separation pay was a proper substitute only for reinstatement; it could not be an
adequate substitute both for reinstatement and for backwages. In effect, the NLRC in its assailed decision
failed to give to petitioner the full relief to which she was entitled under the statute.34 (Emphasis supplied)

The Santos rule has been repeatedly affirmed by this Court, and must be applied to this case.35 Even assuming that
the Tayags had not adduced any evidence to establish the amount of backwages to be paid, it cannot be denied
that under the law, particularly Article 279 of the Labor Code, they are entitled to backwages as a matter of right,
owing to their illegal dismissal. Hence, the NLRC and the Court of Appeals erred in not awarding backwages as
well.

However, the Court recognizes that there may be some difficulty in ascertaining the proper amount of backwages,
considering that the Tayags were apparently paid on a piece-rate basis. In Labor Congress of the Philippines v.
NLRC,36 the Court was confronted with a situation wherein several workers paid on a piece-rate basis were entitled
to back wages by reason of illegal dismissal. However, the Court noted that as the piece-rate workers had been paid
by the piece, "there [was] a need to determine the varying degrees of production and days worked by each worker,"
and that "this issue is best left to the [NLRC]."37 We believe the same result should obtain in this case, and the
NLRC be tasked to conduct the proper determination of the appropriate amount of backwages due to each of the
Tayags.38

Nonetheless, even as the case should be remanded to the NLRC for the proper determination of backwages,
nothing in this decision should be construed in a manner that would impede the award of separation pay to the
Tayags as previously rendered by the NLRC, and affirmed by the Court of Appeals.

WHEREFORE, the Petition is DENIED. The Resolution of the National Labor Relations Commission dated 26 March
2002 and the Decision of the Court of Appeals dated 30 September 2003 are AFFIRMED, with the MODIFICATION
Labor II – 1
that backwages shall be awarded to respondents in such amounts as shall be determined by the National Labor
Relations Commission. In this regard, the case is hereby REMANDED to the National Labor Relations Commission
for the determination of the back wages due respondents, conformably with this Decision. Said Commission is
further DIRECTED TO RESOLVE the issue of backwages within sixty (60) days from its receipt of a copy of this
Decision and of the records of the case and to submit to this Court a report of its compliance herewith within ten (10)
days from the rendition of its resolution. Costs against petitioner.

Labor II – 1
80.) G.R. No. 158045             February 28, 2005

PHILIPPINE COMMERCIAL INTERNATIONAL BANK, petitioner,

vs.
ANASTACIO D. ABAD, respondent.

DECISION

PANGANIBAN, J.:

An employee dismissed for a just cause under Article 282 of the Labor Code may still be awarded separation pay as
a measure of social justice. Such financial assistance, however, is not given when the employee has been validly
dismissed for serious misconduct, or for causes that reflect on moral character or personal integrity.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, challenging the October 14, 2002
1 

Decision and the April 11, 2003 Resolution of the Court of Appeals (CA) in CA-GR SP No. 66368. The assailed
2  3 

Decision disposed as follows:

"WHEREFORE, premises considered, the assailed Decision of respondent Commission in NLRC Case No. V-
000848-99 is hereby AFFIRMED with modification, that is, in addition to the financial award granted by the NLRC,
[petitioner] Bank is further ordered to give [respondent] a separation pay equivalent to one half (1/2) month’s pay for
every year of service. x x x."
4

The assailed Resolution denied petitioner’s Motion for Reconsideration.

The Facts

The facts are narrated by the CA as follows:

"x x x Anastacio D. Abad was the senior Assistant Manager (Sales Head) of [petitioner Philippine Commercial
International Bank (PCI Bank now Equitable PCI Bank)], Tacloban City Branch when he was dismissed from his
work on 03 August 1998.

"He started working with said [petitioner] Bank since 03 December 1973, rose from the ranks and was receiving a
monthly salary of ₱36,358.52 at the time of his termination.

"On 13 March 1998, [Abad] received a Memorandum from [petitioner] Bank concerning the irregular clearing of
PNB-Naval Check of Sixtu Chu, the Bank’s valued client. 1a\^/phi1.net

"On 18 March 1998, [Abad] submitted his Answer, categorically denying that he instructed his subordinates to
validate the out-of-town checks of Sixtu Chu presented for [deposit or encashment] as local clearing checks.

"During the actual investigation conducted by [petitioner] Bank, several transactions violative of the Bank’s Policies
and Rules and Regulations were [uncovered] by the Fact-Finding Committee. Said transactions placed the Bank at
risk in the amount of ₱23,044,527.88 and were consummated in the span of only one (1) month – from 02 February
1998 to 02 March 1998.

"Consequently, Mr. Lorenzo A. Cervantes, the Fact-Finding Officer of [petitioner] Bank, issued, on 01 April 1998,
another Memorandum to [Abad] asking the latter to explain the newly discovered irregularities.

Labor II – 1
"Not satisfied with the explanations of [Abad] in his 11 April 1998 Reply, [petitioner] Bank served
another Memorandum, attaching thereto the 01 July 1998 Decision of the Fact-Finding Committee, terminating his
employment effective immediately upon receipt of the same.

"On 07 September 1998, x x x Abad instituted a Complaint for Illegal Dismissal With Non-Payment of Overtime Pay,
Premium Pay for Holiday and Rest Day, Separation Pay, Retirement Benefits, Damages and Attorney’s Fees.

"On 30 August 1999, after the contending parties[’] submission of their respective Position Papers, Labor Arbiter
Guimoc promulgated his Decision in favor of [petitioner] and against [Abad], to wit:

‘WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of complainant [Abad] to
be legal.  [Petitioner Bank] is, however, directed to indemnify [Abad] in the amount of ₱10,000.00 for its failure to
l^vvphi1.net

fully comply with the requirements of due process.

‘x x x x x x x x x

‘SO ORDERED.’ 5

"Aggrieved by the ruling of the Labor Arbiter, [Abad] appealed the same before the [National Labor Relations
Commission (NLRC)] which, on 29 November 2000, issued [a] Decision, affirming with modification the judgment of
the Labor Arbiter, thus:

‘WHEREFORE, premises considered, the decision of the Labor [A]rbiter Benjamin S. Guimoc dated 30 August 1999
is MODIFIED, to wit:

‘Ordering the [petitioner Bank] to pay the complainant [Abad] in the amount of Twenty One Thousand Two Hundred
Nine & 31/100 (₱21,209.31) representing his proportionate 13th month pay for the year 1998.

‘SO ORDERED.’ 6

"After the denial of his Motion for Reconsideration by [the NLRC] in its Resolution dated 01 June 2001, [Abad]
elevated the case before [the CA in a Petition for Certiorari under Rule 65 of the Rules of Court]." 7

Ruling of the Court of Appeals

The CA sustained the factual findings of the NLRC and the labor arbiter that the dismissal of Abad was valid. The
appellate court ruled that the bank was able to establish that the latter had lost its trust and confidence in him.
8

However, the CA awarded separation pay equivalent to one half (1/2) month pay for every year of service, in
accordance with the social justice policy in favor of the working class. It noted that Abad had acted in the belief that
9 

Sixtu Chu was a valued client of the bank, and that there was an existing bills purchase line agreement in client’s
favor.10

Hence, this Petition. 11

The Issue

Petitioner states the issue in this wise:

"The Court of Appeals grossly erred in awarding separation pay equivalent to one-half (1/2) month’s pay for every
year of service to respondent, the same being contrary to law and jurisprudence." 12

The Court’s Ruling

The Petition is unmeritorious.

Labor II – 1
 Main Issue:

Separation Pay Despite Lawful Dismissal

The Court is tasked to determine the propriety of awarding separation pay to an employee despite the finding
of lawful dismissal. Pertinent here are the rules on dismissals of employees.

Applicable Law

The award of separation pay is required for dismissals due to causes specified under Articles 283 and 284 of the
13  14 

Labor Code, as well as for illegal dismissals in which reinstatement is no longer feasible. On the other hand, an
15 

employee dismissed for any of the just causes enumerated under Article 282 of the Labor Code is not, as a rule,
16 

entitled to separation pay.17

As an exception, allowing the grant of separation pay or some other financial assistance to an employee dismissed
for just causes is based on equity. The Court has granted separation pay as a measure of social justice even when
18 

an employee has been validly dismissed, as long as the dismissal was not due to serious misconduct or reflective of
personal integrity or morality.

This equitable principle was explained in San Miguel Corporation v. Lao as follows:
19 

"In Soco vs. Mercantile Corporation of Davao [148 SCRA 526, March 16, 1987], separation pay was granted to an
employee who had been dismissed for using the company vehicle for a private purpose. In Tanala vs. National
Labor Relations Commission [322 Phil. 342, January 24, 1996] the payment of separation pay to an employee who
had been dismissed for quarreling with a fellow worker outside the company premises was sustained. Likewise,
in Filipro, Inc. vs. NLRC [229 Phil. 150, October 16, 1999], an award of separation pay was decreed in favor of an
employee who had been validly dismissed for preferring certain dealers in violation of company policy. The Court,
however, disallowed the grant of separation pay to employees dismissed for serious misconduct or for some other
causes reflecting on his moral character. In the case of Philippine Long Distance Telephone Co. (PLDT) vs. NLRC
and Abucay [164 SCRA 671, 682, August 23, 1988], the Court clarified a perceived incongruence in its several
pronouncements by stating thusly:

‘We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances
where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral
character. Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving
moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the
dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of
social justice.

‘x x x x x x x x x

‘The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the
underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense.’

The dictum was followed in Philippine National Construction Corporation vs. NLRC [170 SCRA 207, February 9,
1989], where the Court deleted an award of separation pay to an employee who had been found guilty of dishonesty
for having stolen company property. Cosmopolitan Funeral Homes, Inc. vs. Maalat [187 SCRA 108, July 2, 1990]
disallowed the grant of separation pay to an employee who was dismissed for dishonesty for an understatement of
reported contract price against the actual contract price charged to and paid by the customers and for
misappropriation of funds or collections. A similar holding was reached in Zenco Sales, Inc. vs. NLRC [234 SCRA
689, August 3, 1994], where the dismissed employee was found guilty of gross misconduct for having used his
employer's property, equipment and personnel in his personal business. The Court reversed the decision of the
NLRC in San Miguel Corporation vs. NLRC [325 Phil. 940, March 29, 1996], granting an employee, dismissed for
dishonesty, the privilege to retire from the company with a right to avail himself of 100% of the benefits the company
had offered to retiring employees. Quite recently, in Edge Apparel, Inc. vs. NLRC [349 Phil. 972, February 12, 1998],
the Court, categorizing the two causes for the dismissal of an employee — ‘just causes’ under Article 282 of the

Labor II – 1
Labor Code and ‘authorized causes’ under Article 283 and 284 of the same code — reiterated that an employee
whose employment was terminated for a just cause would not be so entitled as a matter of right to the payment of
separation benefits."20

In line with San Miguel, separation pay depends on the cause of the dismissal and the circumstances of each case.
The dismissal should not be due to serious misconduct or to causes reflective of moral character. Notwithstanding a
valid dismissal, an employee’s lack of moral depravity could evoke compassion and thereby compel an award of
separation pay.

Dismissal in the Present Case

The CA affirmed the factual findings of the labor arbiter and the NLRC that Abad had violated the bank’s policies,
rules and regulations, and code of discipline. On this basis, the appellate court ruled that the dismissal was valid on
21 

the ground that the bank had lost its trust and confidence in Abad, who was a managerial employee. 22

This Court observes that petitioner is not challenging the ground relied upon by the CA in affirming the dismissal.
Instead, petitioner merely disputes the award of separation pay, arguing that respondent deliberately violated the
bank’s policies and was therefore not entitled to the grant. Such argument, though relevant to a justification of the
23 

dismissal, does not directly relate to the propriety of awarding separation pay.

Under the San Miguel test, separation pay may be awarded, provided that the dismissal does not fall under either of
two circumstances: (1) there was serious misconduct, or (2) the dismissal reflected on the employee’s moral
character. The dismissal in the present case was due to loss of trust and confidence, not serious misconduct. There
had been jurisprudence granting separation pay for dismissals based on this ground. Not falling under the first
24 

qualification, the query now shifts to whether it was reflective of the moral character of respondent.

While he violated the bank’s policy, rules and regulations, there was no indication that his actions were perpetrated
for his self-interest or for an unlawful purpose. On the contrary, and as the facts indicate, his actions were motivated
25 

by a desire to accommodate a valued client of the bank.

The Court is also mindful of previous rulings that have granted separation pay after giving considerable weight to
26 

long years of employment. Accordingly, respondent’s employment of 25 years, with only one other infraction that
petitioner has failed to elaborate on, supports the award of separation pay.

Alleged Change of Theory

Petitioner also contests the arguments of respondent that (1) Sixtu Chu was a valued a client and (2) had a bills
purchase line agreement with the bank. Allegedly, these were raised for the first time on appeal. Accordingly, 27 

petitioner contends that respondent was allowed to change his theory when he appealed the case to the CA. 28

These contentions could have been proper subjects for our consideration, had petitioner itself not been guilty of the
same fault of changing theory on appeal. A perusal of its Motion for Partial Reconsideration of the assailed Decision
29 

shows that this issue was not raised therein. Petitioner did not question the CA’s consideration of these alleged new
defenses. Prior to raising the argument before this Court, it should have raised the matter in its Motion for Partial
Reconsideration, in order to give the appellate court an opportunity to correct its ruling. For it to raise this very issue
30 

before us now would be improper, since it failed to do so before the CA.

At any rate, the alleged change of theory on appeal has not been sufficiently shown by petitioner. It has merely
raised bare allegations and referred to the defenses in the Supplemental Position Paper filed by respondent with the
labor arbiter.  From those bare statements, no firm conclusion can be inferred that respondent limited his
31 

allegations only to those stated therein.

All in all, petitioner has not successfully demonstrated any reversible error in the assailed Decision and Resolution
of the appellate court. 1awphi1.nét

WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED.

Labor II – 1
Labor II – 1
81.) G.R. No. 170001             April 4, 2007

ARLYN D. BAGO, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and STANDARD INSURANCE CO. INC. AND/OR ERNESTO
ECHAUS, Respondents.

DECISION

CARPIO MORALES, J.:

In a complaint filed on November 20, 20021 with the Human Resource Development Department (HRDD) of
respondent Standard Insurance Company Incorporated (SICI), Celia P. Abordo (Celia), the Head of the Tuguegarao
Branch of SICI, charged five employees including herein petitioner Arlyn Bago (Arlyn), an encoder, and Elsie
Pagarigan (Elsie), an assistant underwriter, with "manipulating money out of the agents/zone managers and
[Celia’s] commissions."2 She further charged Arlyn and two other employees with "spreading rumors to
clients/agents/zone managers that [Celia] is having an ‘affair’ with the claims assistant."3

On Celia’s recommendation, the Internal Audit Department conducted a special audit from November 25-29, 2002
which disclosed as follows, quoted verbatim:

1. Agents whose business coded under the Branch Head were not given commissions due to them.
Likewise, commissions due to the Branch Head were not also given . . . to her. Commission slips were not
signed by the corresponding recipient. This is done in the following ways, to wit;

A. through Branch Head’s commission drawn in the G&A Fund (Cashier encash the check and the
Accountant computes commissions of sub-agent and other expenses to be deducted from the cash.
Sub-agents will be given a commission lower than the amount that was reported to the Branch
Head. Commissions due to sub-agents that was being reported to the Branch Head is written in a
scratch paper by the Branch Accountant, thus commission will be given to sub-agent is concealed to
their Branch Head as well as the agent. Cash due will then be given to the Branch Head by the
Branch Cashier x x x

xxxx

B. through cash collection. Branch Head did not receive the amount what is due to her, likewise
discount given to client is also concealed (lower than what was computed in the commission slip.)
They commonly used the word "discount" in the commission slip to mislead the Branch Head in
approving it; x x x

xxxx

2. The above dishonesty was admitted by the Branch Cashier and Branch Accountant as per statement
submitted to the auditors x x x and discussions with them on November 27, 2002. However, their letters
differ as to the details of the act. x x x

The above act of dishonesty was discussed with the Branch. It was admitted that there was a connivance
between Branch Cashier, Accountant, Underwriter, and the Encoder during the meeting as evidenced by
their signing on the auditors’ report on November 27, 2002. They admitted that the amount they get from the
act is divided equally among them. x x x

3. During the verification of the auditors regarding the common fund record, the Branch Cashier provided
xxx a photocopy of a portion of the common fund record. x x x As per record, the act started last quarter of
2001. The staff obtained loans from the fund except the Claims Assistant. x x x The running balance of the
fund as of November 5, 2002 is ₱5, 039.09.
Labor II – 1
 4. A written statement from the Underwriter and the Encoder was also obtained. x x x They are blaming the
Branch Accountant and the Branch Cashier for such an act of dishonesty. They are also denying that they
are part of connivance and that they do not know that the money they received comes from such act of
dishonesty. However, on the last part of their letter they are asking for an apology for being a part of the act
they have committed.

x x x x4 (Underscoring and emphasis partly in the original, partly supplied; italics supplied)

The audit also disclosed that the alleged rumor about Celia started when she requested the Claims Evaluator to
drive for her and allowed him to bring home her car.5

On the request of the HRDD,6 Celia submitted statements of three witnesses7 to substantiate the charge of rumor-
mongering.

The HRDD thus directed Arlyn and the two other concerned employees to explain within five days why appropriate
sanction under SICI’s Code of Conduct should not be imposed on them relative to the charge of spreading malicious
rumors about Celia.8 Complying, Arlyn and her two co-employees explained, by letter of December 3, 2002
addressed to the Assistant Vice President of SICI’s legal department, as follows:

We, the concerned staff of Standard Insurance Co., Inc. Tuguegarao Branch, would like to appeal to your good end
as we are asking apologies for all offenses and distractions committed by us against our Branch Head. We humbly
acknowledge our faults. "Hindi nga po naming maubos maisip kung bakit at paano naming nagawa yun sa kabila ng
lahat ng kabutihang nagawa sa amin ng aming boss." Ayon nga sa kasabihan, "Ang pagsisisi ay laging nasa huli".
Lubos po kaming nagsisisi ngayon pero sana hindi pa huli ang lahat.

On some occasions, jealousy and anger have driven us towards our boss. Tao lang po kami na mahina at
nagkakasala. Kungsabagay, sa pangyayaring ito marami kaming natutunan. Ngayon alam na namin na dapat
naming protektahan at suportahan ang aming Branch Head. We have already personally asked forgiveness from
Ma’am Cecil [sic], she readily forgave us naman. But then, we still seek for your further consideration and advice.
PLEASE GIVE US ANOTHER CHANCE, SIR, to prove that we are sincere and to show how deeply sorry we are for
all inconveniences we have done. Sana man lang, kahit ito na ang pamasko niyo sa amin. 9 (Emphasis and italics in
the original; underscoring supplied)

Noting that Arlyn et al. had not responded to the charge of rumor-mongering, the HRDD gave them an extension of
time to comply. They accordingly replied:

While it is true that we did not answer the first memo sent to us, we likewise deny that such act was an admission of
the offense charged to us. Please be known that during the period of five (5) days given to us to explain our side, we
approached Ma’am Cecil [sic] and earnestly talked to her begging forgiveness for all offenses we’ve done. The
conversation we’ve had was very emotional and touchy. We cried deeply as we asked for another chance to show
how sorry we were with deepest desires to work with her once again.

To this, Ma’am Cecil [sic] recognized our sincerity and she readily forgave us. It shocked us that she was able to get
through with our faults despite our shortcomings. We really appreciate our boss who has a big soft heart. We then
planned to start anew. Days passed and we noticed she forgot all about the issue. There’s no sign of remorse in her
anymore. She really has forgiven us we know. That’s why, we decided not to answer the memo any longer since we
have thought the problem is already over. Whether we failed to comply in your first memo, our apologies. x x
x10 (Underscoring supplied)

The HRDD likewise required Arlyn, along with her similarly charged co- employees, to explain within five days why
appropriate sanction should not be imposed upon them for dishonesty, given their admission thereof during the
conduct of the internal audit.11 Arlyn’s explanation reads:

My admission to my participation to the misdeed was deliberately made during the Auditors’ visit to Tug. branch
simply because I would like to put an end to that form of Dishonesty which we have gradually committed, for one
would not put a blame on the person who initiated the proposal but I would consider the wrong doing a collective

Labor II – 1
responsibility of the group. It is with much regret, however, because I have succumb [sic]/or gave in to such
fraudulent move.

I love my work and the company I work with. I’m already on my 8 years working with the co. but I have not been
involved on any act of dishonesty nor have been complained of administratively or otherwise. Moreover, the money
pooled by us turned out to be a petty cash fund were [sic] we could borrow for emergency purposes. I’m willing to
return whatever amount I have benefited. I acknowledge and deeply apologized for that said shortcomings. I know
that with that misdeed, it has affected my integrity, which I have taken cared [sic] of a number of years. The
complaint of the Branch Head was already discussed with the staff and the said problem has already been given a
solution and the staff swore that they would never commit the same mistakes again. I’m also grateful to our Branch
Head for having a big heart that despite the act we’ve done to her she still forgave us.

All I request for the company is to give me one more chance to make up for the things I have done and to proved
[sic] that I’m still worthy to work in this company. Once again, I beg for the company’s understanding and
compassion.12 (Underscoring supplied)

Arlyn et al. were soon informed about the conduct of a formal hearing of the charges on February 7, 2003 during
which they could be assisted by counsel and present additional evidence.13 The records show that on the scheduled
hearing on February 7, 2003, SICI employees were interviewed. There is no showing, however, if Arlyn et al.
attended the hearing.14

Arlyn et al. were later terminated effective March 31, 2003.15

Arlyn and Elsie subsequently filed separate complaints for illegal dismissal against respondent SICI and its
President-co-respondent Ernesto T. Echaus. The complaints were consolidated. 16

By Decision of October 27, 2003, Executive Labor Arbiter Salvador V. Reyes found that Arlyn and Elsie
were illegally dismissed and accordingly ordered their reinstatement to their former positions, without loss of
seniority rights,17 and the award to them of full backwages and other benefits they normally enjoyed under existing
company policy, moral damages, exemplary damages, and attorney’s fees.18

SICI later manifested that it opted to adopt payroll reinstatement for Arlyn and Elsie pending appeal which the Labor
Arbiter approved on December 10, 2003.19

On appeal20 by respondents, the National Labor Relations Commission (NLRC), by Decision21 dated September 27,
2004, reversed the Labor Arbiter’s decision and declared valid the termination of Arlyn and Elsie’s services on the
grounds of loss of trust and confidence and dishonesty.22 Arlyn and Elsie’s Joint Motion for Reconsideration23 having
been denied24 by the NLRC, Arlyn filed a Petition for Certiorari and Prohibition with the Court of Appeals which, by
Decision25 dated August 25, 2005, it denied.

Hence, Arlyn’s present Petition for Review on Certiorari,26 positing that the appellate court gravely erred

A. . . . [IN] RUL[ING] THAT PETITIONER IS NOT AN ORDINARY RANK-AND-FILE EMPLOYEE [SO] THAT SHE

COULD BE DISMISSED FOR LOSS OF TRUST AND CONFIDENCE.

B. . . . IN METING THE PENALTY OF DISMISSAL TO HEREIN PETITIONER GIVEN THE FACT THAT THE
ACTUAL AMOUNT OF MONEY ALLEGEDLY MISAPPROPRIATED WAS NEVER ESTABLISHED.27 (Underscoring
supplied)

Arlyn also raises in her present petition the lack of "further" investigation "despite [her] insistent denial of the
charge,"28 and the lack of opportunity to cross-examine the witnesses whose statements were submitted by Celia to
prove her charge of rumor-mongering.29

Furthermore, Arlyn complains that after the NLRC reversed the Labor Arbiter’s decision, respondents "unilaterally
discontinued [her] reinstatement pending appeal contrary to prevailing laws and jurisprudence."30 She thus prays
that this Court "order respondent to pay the benefits due [her] from September 2004 [when after the NLRC declared
Labor II – 1
her dismissal valid, respondents discontinued her reinstatement] up to [the] present pursuant to Art. 223 of the
Labor Code and existing jurisprudence, pending resolution" of the present petition."31

The petition is bereft of merit.

Arlyn’s claim that she is an ordinary rank-and-file employee, hence, she cannot be dismissed for loss of trust and
confidence does not lie. The observation of the Court of Appeals that "[h]er work is of such nature as to require a
substantial amount of trust and confidence on the part of x x x her employer"32 is well-taken in light of her following
functions, as enumerated by the NLRC:

1. Batches, collates and encode[s] policies, endorsements and official receipts;

2. Generates printed production, collection, statistical and receivable reports for submission to the Head
Office;

3. Reconciles and finalizes production and collection reports;

4. Maintains the computer hardware and software; and

5. Performs other related functions as may be assigned to her by her superior from time to time, 33

which functions "required the use of judgment and discretion."34

Arlyn of course incorrectly assumes that mere rank-and-file employees cannot be dismissed on the ground of loss of
confidence. Jurisprudence holds otherwise albeit it requires "a higher proof of involvement" in the questioned acts.

As a general rule, employers are allowed a wide latitude of discretion in terminating the employment of managerial
personnel or those who, while not of similar rank, perform functions which by their nature require the employer’s full
trust and confidence. Proof beyond reasonable doubt is not required. It is sufficient that there is some basis for 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 participation therein renders him unworthy of the
trust and confidence demanded by his position. This must be distinguished from the case of ordinary rank-and-file
employees, whose termination on the basis of these same grounds requires a higher proof of involvement in the
events in question; mere uncorroborated assertions and accusations by the employer will not suffice.35 (Emphasis
and underscoring supplied)

Even assuming that Arlyn may be considered a rank and file employee, sufficient evidence of her involvement in the
dishonest scheme of SICI’s accountant and cashier who were also charged and found guilty exists. Not only was
her participation established by the internal audit conducted; the cashier identified her as part of the scheme,36 and
she herself admitted her involvement. Her claim that she merely received money from the cashier and the
accountant without knowledge of its illegal source37 is contradicted by her subsequent statement of January 7, 2003
submitted to the HRDD owning up to having participated in the scheme.38

But even assuming further that Arlyn may not be dismissed for loss of confidence, she can, on the ground of fraud
or betrayal of trust, following Article 282 of the Labor Code which provides that:

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

xxxx

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

xxxx

Labor II – 1
(e) Other causes analogous to the foregoing.39 (Emphasis supplied)

Arlyn’s argument that "Even granting that there was withdrawal from the [Branch Head’s] commissions, [SICI] was
not even prejudiced financially [and] its income was not diminished [as the withdrawn amounts were not] diverted
from its coffers"40 fails. Etcuban, Jr. v. Sulpicio Lines, Inc.41 instructs that:

"x x x Whether or not the respondent was financially prejudiced is immaterial. Also, what matters is not the amount
involved, be it paltry or gargantuan; rather the fraudulent scheme in which the petitioner was involved, which
constitutes a clear betrayal of trust and confidence." x x x42 (Underscoring supplied)

As for Arlyn’s claim that she was denied due process and her admission was improvidently obtained,43 the records of
the case show otherwise. In addition to the conduct of an internal audit during which she was heard, the
requirements of twin-notice and hearing were complied with.

Respecting Arlyn’s claim that she was denied a chance to cross-examine Celia’s witnesses who executed
statements substantiating the charge of rumor-mongering, Arlyn’s joint statements which she and her co-employees
executed admitting the truth of the said charge44 rendered it unnecessary to cross-examine the witnesses.

As for the propriety of dismissal as a penalty in light of Arlyn’s eight years of service during which, so she claims,
she committed no infraction, the doctrines established in Salvador v. Philippine Mining Service Corp.,45 to wit:

To be sure, length of service is taken into consideration in imposing the penalty to be meted an erring employee.
However, the case at bar involves dishonesty and pilferage by petitioner which resulted in respondent’s loss of
confidence in him. Unlike other just causes for dismissal, trust in an employee, once lost is difficult, if not impossible,
to regain.46 (Underscoring supplied)

and in Flores v. NLRC,47 to wit:

The fact that petitioner worked for private respondent for twenty-one (21) years, if it is to be considered at all, should
be taken against him. The infraction that he committed, vis-à-vis his long years of service with the company, reflects
a regrettable lack of loyalty. Loyalty that he should have strengthened instead of betrayed. If an employee’s length
of service is to be regarded as a justifying circumstance in moderating the penalty of dismissal, it will actually
become a prize for disloyalty, perverting the meaning of social justice and undermining the efforts of labor to
cleanse its ranks of all undesirables.48 (Emphasis and underscoring supplied) apply.

Finally, on Arlyn’s claim that respondents "unilaterally withheld [her] payroll reinstatement" after the NLRC reversed
on September 27, 2004 the Labor Arbiter’s decision, Article 223, paragraph 6 of the Labor Code provides that the
decision of the NLRC on appeals from decisions of the Labor Arbiter "shall become final and executory after ten (10)
calendar days from receipt thereof by the parties." The 2002 New Rules of Procedure of the NLRC provided:

RULE VII

xxxx

SECTION 14. FINALITY OF DECISION OF THE COMMISSION AND ENTRY OF JUDGMENT. - (a) Finality of the
Decisions, Resolutions or Orders of the Commission. Except as provided in Rule XI, Section 9, the decisions,
resolutions or orders of the Commission/Division shall become executory after ten (10) calendar days from receipt of
the same.

(b) Entry of Judgment. - Upon the expiration of the ten (10) calendar day period provided in paragraph (a) of
this section, the decision/resolution/order shall, as far as practicable, be entered in a book of entries of
judgment.

(c) Allowance for Delay of Mail in the Issuance of Entries of Judgment. - In issuing entries of judgment, the
Executive Clerk of Court or the Deputy Executive Clerk, in the absence of a return card or certification from

Labor II – 1
 the post office concerned, shall determine the finality of the decision by making allowance for delay of mail,
computed sixty (60) calendar days from the date of mailing of the decision, resolution or order.49

That the Court of Appeals may take cognizance of and resolve a petition for certiorari for the nullification of the
decisions of the NLRC on jurisdictional and due process considerations does not affect the statutory finality of the
NLRC Decision.50 The 2002 New Rules of Procedure of the NLRC so provided:

RULE VIII

xxxx

SECTION 6. EFFECT OF FILING OF PETITION FOR CERTIORARI ON EXECUTION. - A petition for certiorari with
the Court of Appeals or the Supreme Court shall not stay the execution of the assailed decision unless a temporary
restraining order is issued by the Court of Appeals or the Supreme Court.51

In the case at bar, Arlyn received the September 27, 2004 NLRC decision on October 25, 2004,52 and the January
31, 2005 NLRC Resolution denying her Motion for Reconsideration on February 23, 2005.53 There is no showing
that the Court of Appeals issued a temporary restraining order to enjoin the execution of the NLRC decision, as
affirmed by its Resolution of January 31, 2005.

If above-quoted paragraph (a) of Section 14 of Rule VII of the 2002 NLRC New Rules of Procedure were followed,
the decision of the NLRC would have become final and executory on March 7, 2005, ten (10) calendar days from
February 25, 2005. The NLRC, however, issued on June 16, 2005 a Notice of Entry of Judgment54 stating that the
NLRC Resolution of January 31, 2005 became final and executory on April 16, 2005, apparently following the
above-quoted last paragraph of Section 14 of Rule VII. No objection having been raised by any of the parties to the
declaration in the Notice of Entry of Judgment of the date of finality of the NLRC January 31, 2005 Resolution,
Arlyn’s payroll reinstatement ended on April 16, 2005. It goes without saying that since this Court is sustaining the
NLRC decision, no issue of payroll reinstatement may be considered at all after April 16, 2005.

WHEREFORE, the petition is, in light of the foregoing discussions, DENIED and the questioned decision of the
court a quo is AFFIRMED with MODIFICATION in that respondent Standard Insurance Co., Inc. is ordered to pay
the salaries due petitioner, Arlyn Bago, from the time her payroll reinstatement was withheld after the promulgation
on September 27, 2004 of the decision of the National Labor Relations Commission until April 16, 2005 when it
became final and executory.

Labor II – 1
82.) G.R. No. 161305             February 9, 2007

MILAGROS PANUNCILLO, Petitioner,
vs.
CAP PHILIPPINES, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Assailed via Petition for Review1 are the Decision dated May 16, 20032 and Resolution dated November 17, 20033 of
the Court of Appeals in CA-G.R. SP No. 74665 which declared valid the dismissal of Milagros Panuncillo (petitioner)
by CAP Philippines, Inc. (respondent).

Petitioner was hired on August 28, 1980 as Office Senior Clerk by respondent. At the time of her questioned
separation from respondent on April 23, 1999, she was receiving a monthly salary of ₱16,180.60.

In order to secure the education of her son, petitioner procured an educational plan (the plan) from respondent
which she had fully paid but which she later sold to Josefina Pernes (Josefina) for ₱37,000. Before the actual
transfer of the plan could be effected, however, petitioner pledged it for ₱50,000 to John Chua who, however, sold it
to Benito Bonghanoy. Bonghanoy in turn sold the plan to Gaudioso R. Uy for ₱60,000.

Having gotten wind of the transactions subsequent to her purchase of the plan, Josefina, by letter of February 10,
1999,4 informed respondent that petitioner had "swindled" her but that she was willing to settle the case amicably as
long as petitioner pay the amount involved and the interest. She expressed her appreciation "if [respondent] could
help her in anyway."

Acting on Josefina’s letter, the Integrated Internal Audit Operations (IIAO) of respondent required petitioner to
explain in writing why the plan had not been transferred to Josefina and was instead sold to another. Complying,
petitioner proffered the following explanation:

Because of extreme need of money, I was constrained to sell my CAP plan of my son to J. Pernes last July, 1996, in
the amount of Thirty Seven Thousand Pesos (P37,000.) The plan was not transferred right away because of lacking
requirement on the part of the buyer (birth certificate). The birth certificate came a month later. While waiting for the
birth certificate, again because of extreme need of money, I was tempted to pawned [sic] the plan, believing I can
redeemed [sic] it later when the birth certificate will come.

Last year, I was already pressured by J. Pernes for the transfer of the plan. But before hand, she already knew the
present situation. I was trying to find means to redeemed [sic] the plan but to no avail. I cannot borrow anymore from
my creditors because of outstanding loans which remains unpaid. As of the present, I am heavily debtladen and I
don’t know where to run.

I can’t blame the person whom I pawned the plan if he had sold it. I can’t redeemed [sic] it anymore. Everybody
needs money and besides, I have given them my papers.

I admit, I had defrauded Ms. J. Pernes, but I didn’t do it intentionally. At first, I believe I can redeem the plan
hoping I can still borrow from somebody.

With my more than 18 years stay with the company, I don’t have the intention of ruining my image as well as the
company’s. I think I am just a victim of circumstances.5 (Emphasis and underscoring supplied)

A show-cause memorandum6 dated February 23, 1999 was thereupon sent to petitioner, giving her 48 hours from
receipt thereof to explain why she should not be disciplinarily dealt with. Petitioner did not comply, however.

Labor II – 1
The IIAO of respondent thus conducted an investigation on the matter. By Memorandum of April 5, 1999,7 the IIAO
recommended that, among other things, administrative action should be taken against petitioner for violating Section
8.4 of respondent’s Code of Discipline reading:

Committing or dealing any act or conniving with co-employees or anybody to defraud the company or
customer/sales associates.

In the same memorandum, the IIAO reported other matters bearing on petitioner’s duties as an employee, to wit:

OTHERS:

We also received a copy of demand letter of a certain Evelia Casquejo addressed to Ms. Panuncillo requiring the
latter to pay the amount of P54,870.00 for the supposed transfer of the lapsed plan of Subscriber Corazon Lintag
with SFA # 25-67-40-01-00392. Ms. Panuncillo received the payment of P25,000.00 and P29,870.00 on July 17,
1997 and July 18, 1997 respectively (Exhibits L&M).

Ms. Panuncillo verbally admitted that she was the one who sold the plan to Ms. Casquejo but with the authorization
from Ms. Lintag. However, the transfer was not effected because she had misappropriated a portion of the
money until the plan was terminated. Ms. Casquejo, however, did not file a complaint because Ms. Panuncillo
executed a Special Power of Attorney authorizing the former to receive P68,000 of Ms. Panuncillo’s retirement
pay (Exhibit N).8 (Emphasis in the original; underscoring supplied))

On April 7, 1999, another show-cause memorandum was sent to petitioner by Renato M. Daquiz (Daquiz), First Vice
President of respondent, giving her another 48 hours to explain why she should not be disciplinarily dealt with in
connection with the complaints of Josefina and Evelia Casquejo (Evelia). Complying with the directive, petitioner, by
letter of April 10, 1999, on top of reiterating her admission of having "defrauded" Josefina, admitted having received
from Evelia the payment for a lapsed plan, thus:

With regards to [Evelia’s] case, yes its [sic] true I had received the payment but it was accordingly given to the
owner or Subscriber Ms. C. Lintag. The plan was not transferred because it was already forfeited and we, Ms.
Lintag, [Evelia] and I already made settlement of the case.

I think I have violated Sec. 8.4 of the company’s Code of Discipline. I admit it is my wrongdoing. I was only
forced to do this because of extreme needs to pay for my debts. I am open for whatever disciplinary action that
will be sanctioned againts [sic] me. I hope it is not termination from my job. How can I pay for obligations if
that will happen to me.

As for [Josefina], I have the greatest desire to pay for my indebtedness but my capability at the moment is nil.
(space) I have been planning to retire early just to pay my obligations. That is why I had written to you last year
inquiring tax exemption when retiring. I have been with the company for almost 19 years already and I never intend
[sic] to smear its name as well as mine. I was only forced by circumstances. Although it hurts to leave CAP, I will be
retiring on April 30, 1999.

x x x x9 (Emphasis and underscoring supplied)

Respondent thereupon terminated the services of petitioner by Memorandum dated April 20, 1999.10

Petitioner sought reconsideration of her dismissal, by letter of April 23, 1999 addressed to Daquiz, imploring as
follows:

. . . Please consider my retirement letter I sent to you. I would like to avail [of] the retirement benefit of the company.
The proceeds of my retirement could help me pay some of my obligations as well as the needs of my family. My
husband is jobless and I am the breadwinner of the family. If I will be terminated, I don’t know what will happen to
us.

Sir, I am enclosing the affidavit of Ms. Evelia Casquejo proving that we have already settled the case.
Labor II – 1
 x x x x11 (Underscoring supplied) 1awphi1.net

Pending resolution of petitioner’s motion for reconsideration, respondent received a letter dated April 28, 199912 from
one Gwendolyn N. Dinoro (Gwendolyn) who informed that she had been paying her "quarterly dues" through
petitioner but found out that none had been remitted to respondent, on account of which she (Gwendolyn) was
being penalized with interest charges.

Acting on petitioner’s motion for reconsideration, Daquiz, by letter-memorandum of May 5, 1999, denied the same in
this wise:

A review of your case was made per your request, and we note that it was not just a single case but multiple
cases, that of Ms. Casquejo, Ms. Pernes, and newly reported Ms. Dinoro. Furthermore, the cases happened way
back in July 1996 and 1997, and were just discovered recently. In addition, the misappropriation of money/or act to
defraud the company or customer was deliberate and intentional. There were several payments received – over a
period of time. While you plead for your retirement benefit to help you pay some of your obligations, as well as the
need of your family (your husband being jobless and being the breadwinner), these thoughts should have crossed
your mind before you committed the violations rather than now. To allow you to retire with benefits, is to tolerate and
encourage others to do the same in the future, as it will be a precedent that will surely be invoked in similar
situations in the future, as it will be a precedent that will surely be invoked in similar situations in the future. It is also
unfair to others who do their jobs faithfully and honestly. If we let you have your way, it will appear that we let
you scot-free and even reward you with retirement – someone who deliberately violated trust and
confidence of the company and customers.

Premises considered, the decision to terminate your services for cause stays and the request for reconsideration is
denied.

x x x x13 (Emphasis and underscoring supplied)

Petitioner thus filed a complaint14 for illegal dismissal, 13th month pay, service incentive leave pay, damages and
attorney’s fees against respondent.

The Labor Arbiter, while finding that the dismissal was for a valid cause, found the same too harsh. He thus ordered
the reinstatement of petitioner to a position one rank lower than her previous position, and disposed as follows:

WHEREFORE, the foregoing considered, judgement [sic] is hereby rendered directing the respondent to pay
complainant’s 13th Month pay and Service Incentive Leave Pay for 1999 in proportionate amount computed as
follows:

13th Month Pay

January 1, 1999 to April 1, 1999

= 3 months

= P16,180.60/12 mos. x 3 mos. P4,045.14

Service Incentive Leave

= P16,180.60/26 days

=P622.30 per day x 5 days/12 months. 777.87

TOTAL --------------------------------P4,823.01

Labor II – 1
Plus P482.30 ten (10%) Attorney’s Fees or a total aggregate amount of PESOS: FIVE THOUSAND THREE
HUNDRED FIVE & 31/100 (P5,305.31).

Respondent is likewise, directed to reinstate the complainant to a position one rank lower without
backwages.15 (Underscoring supplied)

On appeal, the National Labor Relations Commission (NLRC), by Decision of October 29, 2001, reversed that of the
Labor Arbiter, it finding that petitioner’s dismissal was illegal and accordingly ordering her reinstatement to her
former position. Thus it disposed:

WHEREFORE, the Decision in the main case dated February 18, 2000 of the Labor Arbiter declaring the dismissal
of the complainant valid, and his Order dated June 26, 2000 declaring the Motion to Declare Respondent-appellant
in Contempt as prematurely filed and ordering the issuance of an alias writ of execution are hereby SET ASIDE,
and a new one is rendered DECLARING the dismissal of the complainant illegal, and ORDERING the respondent,
CAP PHILIPPINES, INCORPORATED, the following:

1. to reinstate the complainant MILAGROS B. PANUNCILLO to her former position without loss of seniority
rights and with full backwages from the date her compensation was withheld from her on April 20, 1999 until
her actual reinstatement;

2. to pay to the same complainant P4,045.14 as 13th month pay, and P777.89 as service incentive leave
pay;

3. to pay to the same complainant moral damages of FIFTY THOUSAND PESOS (P50,000.00), and
exemplary damages of another FIFTY THOUSAND PESOS (P50,000.00);

4. to pay attorney’s fees equivalent to ten percent (10%) of the total award exclusive of moral and exemplary
damages.

Further, the complainant’s Motion to Declare Respondent in Contempt dated May 3, 2000 is denied and rendered
moot by virtue of this Decision.

All other claims are dismissed for lack of merit.16 (Underscoring supplied)

In so deciding, the NLRC held that the transaction between petitioner and Josefina was private in character and,
therefore, respondent did not suffer any damage, hence, it was error to apply Section 8.4 of respondent’s Code of
Discipline.

Respondent challenged the NLRC Decision before the appellate court via Petition for Certiorari.17 By Decision of
May 16, 2003,18 the appellate court reversed the NLRC Decision and held that the dismissal was valid and that
respondent complied with the procedural requirements of due process before petitioner’s services were terminated.

Hence, the present petition, petitioner faulting the appellate court

x x x IN REVIEWING THE FINDINGS OF FACT OF THE LABOR ARBITER AND THE NATIONAL LABOR
RELATIONS COMMISSION THAT RESPONDENT CAP PHILIPPINES, INC., HAS NOT BEEN DEFRAUDED NOR
DAMAGED IN THE TRANSACTION/S ENTERED INTO BY PETITIONER RELATING TO HER FULLY PAID
EDUCATIONAL PLAN.

II

x x x IN HOLDING THAT RESPONDENT CAP PHILIPPINES, INC. IS THE INSURER OF PETITIONER’S FULLY
PAID EDUCATIONAL PLAN UNDER THE INSURANCE CODE.

Labor II – 1
 III

x x x IN HOLDING THAT PETITIONER WAS DULY AFFORDED DUE PROCESS BEFORE DISMISSAL[,]

and maintaining that she

IV

x x x IS ENTITLED TO HER FULL BACKWAGES FROM THE DATE HER COMPENSATION WAS WITHHELD
FROM HER ON APRIL 20, 1999 PURSUANT TO THE DECISION OF THE NLRC REINSTATING HER TO HER
PREVIOUS POSITION WITH FULL BACKWAGES AND SETTING ASIDE THE DECISION OF THE LABOR
ARBITER REINSTATING HER TO A POSITION NEXT LOWER IN RANK, UNTIL THE REVERSAL OF THE NLRC
DECISION BY THE HONORABLE COURT OF APPEALS.19 (Emphasis and underscoring supplied)

The petition is not meritorious.

Whether respondent did not suffer any damage resulting from the transactions entered into by petitioner, particularly
that with Josefina, is immaterial. As Lopez v. National Labor Relations Commission instructs:

That the [employer] suffered no damage resulting from the acts of [the employee] is inconsequential. In Glaxo
Wellcome Philippines, Inc. v. Nagkakaisang Empleyado ng Wellcome-DFA (NEW-DFA), we held that deliberate
disregard or disobedience of company rules could not be countenanced, and any justification that the disobedient
employee might put forth would be deemed inconsequential. The lack of resulting damage was unimportant,
because "the heart of the charge is the crooked and anarchic attitude of the employee towards his employer.
Damage aggravates the charge but its absence does not mitigate nor negate the employee’s liability." x x x20 (Italics
in the original; underscoring supplied)

The transaction with Josefina aside, there was this case of misappropriation by petitioner of the amounts given to
her by Evelia representing payment for the lapsed plan of Corazon Lintag. While a settlement of the case between
the two may have eventually been forged, that did not obliterate the misappropriation committed by petitioner
against a client of respondent.

Additionally, there was still another complaint lodged before respondent by Gwendolyn against petitioner for failure
to remit the cash payments she had made to her, a complaint she was apprised of but on which she was silent.

In fine, by petitioner’s repeated violation of Section 8.4 of respondent’s Code of Discipline, she violated the trust and
confidence of respondent and its customers. To allow her to continue with her employment puts respondent under
the risk of being embroiled in unnecessary lawsuits from customers similarly situated as Josefina, et al. Clearly,
respondent exercised its management prerogative when it dismissed petitioner.

. . . [T]ime and again, this Court has upheld a company’s management prerogatives 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.

Deliberate disregard or disobedience of rules by the employees cannot be countenanced. Whatever maybe the
justification behind the violations is immaterial at this point, because the fact still remains that an infraction of the
company rules has been committed.

Under the Labor Code, the employer may terminate an employment on the ground of serious misconduct or willful
disobedience by the employee of the lawful orders of his employer or representative in connection with his
work. Infractions of company rules and regulations have been declared to belong to this category and thus are valid
causes for termination of employment by the employer.

xxxx

Labor II – 1
The employer cannot be compelled to continue the employment of a person who was found guilty of maliciously
committing acts which are detrimental to his interests. It will be highly prejudicial to the interests of the employer to
impose on him the charges that warranted his dismissal from employment. Indeed, it will demoralize the rank and
file if the undeserving, if not undesirable, remain in the service. It may encourage him to do even worse and will
render a mockery of the rules of discipline that employees are required to observe. This Court was more emphatic in
holding that in protecting the rights of the laborer, it cannot authorize the oppression or self-destruction of the
employer.21 x x x (Underscoring supplied)

Petitioner nevertheless argues that she was not afforded due process before her dismissal as she was merely
required to answer a show-cause memorandum dated April 7, 1999 and there was no actual investigation
conducted in which she could have been heard.

Before terminating the services of an employee, the law requires two written notices: (1) one to apprise him of the
particular acts or omissions for which his dismissal is sought; and (2) the other to inform him of his employer’s
decision to dismiss him. As to the requirement of a hearing, the essence of due process lies in an opportunity to be
heard, and not always and indispensably in an actual hearing.22

When respondent received the letter-complaint of Josefina, petitioner was directed to comment and explain her side
thereon. She did comply, by letter of February 22, 1999 wherein she admitted that she "had defrauded Ms. J.
Pernes, but [that she] didn’t do it intentionally."

Respondent subsequently sent petitioner a show-cause memorandum giving her 48 hours from receipt why she
should not be disciplinarily sanctioned. Despite the 48-hour deadline, nothing was heard from her until April 10,
1999 when she complied with the second show-cause memorandum dated April 7, 1999.

On April 20, 1999, petitioner was informed of the termination of her services to which she filed a motion for
reconsideration.

There can thus be no doubt that petitioner was given ample opportunity to explain her side. Parenthetically, when an
employee admits the acts complained of, as in petitioner’s case, no formal hearing is even necessary.23

Finally, petitioner argues that even if the order of reinstatement of the NLRC was reversed on appeal, it is
still obligatory on the part of an employer to reinstate and pay the wages of a dismissed employee during
the period of appeal, citing Roquero v. Philippine Airlines,24 the third paragraph of Article 22325 of the Labor Code,
and the last paragraph of Section 16,26 Rule V of the then 1990 New Rules of Procedure of the NLRC.

Petitioner adds that respondent made "clever moves to frustrate [her] from enjoying the reinstatement aspect of the
decision starting from that of the Labor Arbiter (although to a next lower rank), [to that] of the NLRC to her previous
position without loss of seniority rights until it was caught up by the decision of the Honorable Court of Appeals
reversing the decision of the NLRC and declaring the dismissal of petitioner as based on valid grounds."

Respondent, on the other hand, maintains that Roquero and the legal provisions cited by petitioner are not
applicable as they speak of reinstatement on order of the Labor Arbiter and not of the NLRC.

The Labor Arbiter ordered the reinstatement of petitioner to a lower position. The third paragraph of Article 223 of
the Labor Code is clear, however – the employee, who is ordered reinstated, must be accepted back to work under
the same terms and conditions prevailing prior to his dismissal or separation.

Petitioner’s being demoted to a position one rank lower than her original position is certainly not in accordance with
the said third paragraph provision of Article 223. Besides, the provision contemplates a finding that the employee
was illegally dismissed or there was no just cause for her dismissal. As priorly stated, in petitioner’s case, the Labor
Arbiter found that there was just cause for her dismissal, but that dismissal was too harsh, hence, his order for her
reinstatement to a lower position.

The order to reinstate is incompatible with a finding that the dismissal is for a valid cause. Thus this Court
declared in Colgate Palmolive Philippines, Inc. v. Ople:
Labor II – 1
The order of the respondent Minister to reinstate the employees despite a clear finding of guilt on their part is not in
conformity with law. Reinstatement is simply incompatible with a finding of guilt. Where the totality of the
evidence was sufficient to warrant the dismissal of the employees the law warrants their dismissal without making
any distinction between a first offender and a habitual delinquent. Under the law, respondent Minister is duly
mandated to equally protect and respect not only the labor or workers’ side but also the management and/or
employers’ side. The law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of
the employer. x x x As stated by Us in the case of San Miguel Brewery vs. National Labor Union, "an employer
cannot legally be compelled to continue with the employment of a person who admittedly was guilty of misfeasance
or malfeasance towards his employer, and whose continuance in the service of the latter is patently inimical to his
interest."27 (Emphasis and underscoring supplied)

The NLRC was thus correct when it ruled that it was erroneous for the Labor Arbiter to order the
reinstatement of petitioner, even to a position one rank lower than that which she formerly held.28

Now, on petitioner’s argument that, following the third paragraph of Article 223 of the Labor Code, the order of
the NLRC to reinstate her and to pay her wages was immediately executory even while the case was on appeal
before the higher courts: The third paragraph of Article 223 of the Labor Code directs that – "the decision of
the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned,
shall immediately be executory, even pending appeal."

In Roquero, the Labor Arbiter upheld the dismissal of Roquero, along with another employee, albeit he found both
the two and employer Philippine Airlines (PAL) at fault. The Labor Arbiter thus ordered the payment of separation
pay and attorney’s fees to the complainant. No order for reinstatement was issued by the Labor Arbiter, precisely
because the dismissal was upheld.

On appeal, the NLRC ruled in favor of Roquero and his co-complainant as it also found PAL guilty of instigation. The
NLRC thus ordered the reinstatement of Roquero and his co-complainant to their former positions, but without
backwages.

PAL appealed the NLRC decision via Petition for Review before this Court. Roquero and his co-complainant did not.
They instead filed before the Labor Arbiter a Motion for Execution of the NLRC order for their reinstatement which
the Labor Arbiter granted.

Acting on PAL’s Petition for Review, this Court referred it to the Court of Appeals pursuant to St. Martin Funeral
Home v. NLRC.29

The appellate court reversed the NLRC decision and ordered the reinstatement of the decision of the Labor Arbiter
but only insofar as it upheld the dismissal of Roquero.

Back to this Court on Roquero’s Petition for Review, the following material issues were raised:

xxxx

2. Can the executory nature of the decision, more so the reinstatement aspect of a labor tribunal’s order be
halted by a petition having been filed in higher courts without any restraining order or preliminary injunction
having been ordered in the meantime?

3. Would the employer who refused to reinstate an employee despite a writ duly issued be held liable to pay
the salary of the subject employee from the time that he was ordered reinstated up to the time that the
reversed decision was handed down?30

Resolving these issues, this Court held in Roquero:

Article 223 (3rd paragraph) of the Labor Code as amended by Section 12 of Republic Act No. 6715, and Section 2
of the NLRC Interim Rules on Appeals under RA No. 6715, Amending the Labor Code, provide that an order of

Labor II – 1
reinstatement by the Labor Arbiter is immediately executory even pending appeal. The rationale of the law has been
explained in Aris (Phil.) Inc. vs. NLRC:

"In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating a
dismissed or separated employee, the law itself has laid down a compassionate policy which, once more, vivifies
and enhances the provisions of the 1987 Constitution on labor and the working man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as
to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also
expressly affirms with equal intensity. Labor is an indispensable partner for the nation’s progress and stability.

xxxx

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate a dismissed
employee entitles him to payment of his salaries effective from the time the employer failed to reinstate him despite
the issuance of a writ of execution. Unless there is a restraining order issued, it is ministerial upon the Labor Arbiter
to implement the order of reinstatement. In the case at bar, no restraining order was granted. Thus, it was
mandatory on PAL to actually reinstate Roquero or reinstate him in the payroll. Having failed to do so, PAL must pay
Roquero the salary he is entitled to, as if he was reinstated, from the time of the decision of the NLRC until the
finality of the decision of this Court.

We reiterate the rule that technicalities have no room in labor cases where the Rules of Court are applied only in a
suppletory manner and only to effectuate the objectives of the Labor Code and not to defeat them. Hence, even if
the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to
reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher
court. On the other hand, if the employee has been reinstated during the appeal period and such reinstatement
order is reversed with finality, the employee is not required to reimburse whatever salary he received for he is
entitled to such, more so if he actually rendered services during the period.31 (Italics in the original, emphasis and
underscoring supplied)

In the present case, since the NLRC found petitioner’s dismissal illegal and ordered her reinstatement, following the
provision of the sixth paragraph of Article 223, viz:

The [National Labor Relations] Commission shall decide all cases within twenty (20) calendar days from receipt of
the answer of the appellee. The decision of the Commission shall be final and executory after ten (10) calendar days
from receipt thereof by the parties. (Emphasis and underscoring supplied),

the NLRC decision became "final and executory after ten calendar days from receipt of the decision by the parties"
for reinstatement.

In view, however, of Article 224 of the Labor Code which provides:

ART. 224. Execution of decisions, orders or awards. – (a) The Secretary of Labor and Employment or any Regional
Director, the Commission or any Labor Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio  or on motion
of any interested party, issue a writ of execution on a judgment within five (5) years from the date it becomes final
and executory, requiring a sheriff or a duly deputized officer to execute or enforce final decisions, orders or awards
of the Secretary of Labor and Employment or regional director, the Commission, the Labor Arbiter or med-arbiter, or
voluntary arbitrators. In any case, it shall be the duty of the responsible officer to separately furnish immediately the
counsels of record and the parties with copies of said decisions, orders or awards. Failure to comply with the duty
prescribed herein shall subject such responsible officer to appropriate administrative sanctions.

x x x x (Emphasis and underscoring supplied),

there was still a need for the issuance of a writ of execution of the NLRC decision.
Labor II – 1
Unlike then the order for reinstatement of a Labor Arbiter which is self-executory, that of the NLRC is not.
There is still a need for the issuance of a writ of execution. Thus this Court held in Pioneer Texturizing Corp. v.
NLRC:32

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be immediately
executory even pending appeal and the posting of a bond by the employer shall not stay the execution for
reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately
enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites
for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of
Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of
execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a
scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In
other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we
so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223
will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have
ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific
purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be
remedied. x x x In introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No.
6715, Congress should not be considered to be indulging in mere semantic exercise. On appeal, however, the
appellate tribunal concerned may enjoin or suspend the reinstatement order in the exercise of its sound
discretion.33 (Italics in the original, emphasis and underscoring supplied)

If a Labor Arbiter does not issue a writ of execution of the NLRC order for the reinstatement of an employee even if
there is no restraining order, he could probably be merely observing judicial courtesy, which is advisable "if there is
a strong probability that the issues before the higher court would be rendered moot and moribund as a result of the
continuation of the proceedings in the lower court."34 In such a case, it is as if a temporary restraining order was
issued, the effect of which Zamboanga City Water District v. Buhat explains:

The issuance of the temporary restraining order … did not nullify the rights of private respondents to their
reinstatement and to collect their wages during the period of the effectivity of the order but merely suspended the
implementation thereof pending the determination of the validity of the NLRC resolutions subject of the petition.
Naturally, a finding of this Court that private respondents were not entitled to reinstatement would mean that they
had no right to collect any back wages. On the other hand, where the Court affirmed the decision of the NLRC and
recognized the right of private respondents to reinstatement,… private respondents are entitled to the wages
accruing during the effectivity of the temporary restraining order .35 (Emphasis and underscoring supplied)

While Zamboanga was decided prior to St. Martin Funeral and, therefore, the NLRC decisions were at the time
passed upon by this Court to the exclusion of the appellate court, it is still applicable.

Since this Court is now affirming the challenged decision of the Court of Appeals finding that petitioner was validly
dismissed and accordingly reversing the NLRC Decision that petitioner was illegally dismissed and should be
reinstated, petitioner is not entitled to collect any backwages from the time the NLRC decision became final and
executory up to the time the Court of Appeals reversed said decision.

It does not appear that a writ of execution was issued for the implementation of the NLRC order for
reinstatement. Had one been issued, respondent would have been obliged to reinstate petitioner and pay
her salary until the said order of the NLRC for her reinstatement was reversed by the Court of Appeals, and
following Roquero, petitioner would not have been obliged to reimburse respondent for whatever salary she
received in the interim.

In sum, while under the sixth paragraph of Article 223 of the Labor Code, the decision of the NLRC becomes final
and executory after the lapse of ten calendar days from receipt thereof by the parties, the adverse party is not
precluded from assailing it via Petition for Certiorari under Rule 65 before the Court of Appeals and then to this
Court via a Petition for Review under Rule 45. If during the pendency of the review no order is issued by the courts
enjoining the execution of a decision of the Labor Arbiter or NLRC which is favorable to an employee, the Labor

Labor II – 1
Arbiter or the NLRC must exercise extreme prudence and observe judicial courtesy when the circumstances so
warrant if we are to heed the injunction of the Court in Philippine Geothermal, Inc v. NLRC:

While it is true that compassion and human consideration should guide the disposition of cases involving termination
of employment since it affects one’s source or means of livelihood, it should not be overlooked that the benefits
accorded to labor do not include compelling an employer to retain the services of an employee who has been shown
to be a gross liability to the employer. The law in protecting the rights of the employees authorizes neither
oppression nor self-destruction of the employer. It should be made clear that when the law tilts the scale of justice in
favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent
is to balance the scale of justice; to put the two parties on relatively equal positions. There may be cases where the
circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the
result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none).36 (Italics in the
original; emphasis and underscoring supplied)

WHEREFORE, the petition is DENIED. The assailed Court of Appeals Decision dated May 16, 2003 and Resolution
dated November 17, 2003 are AFFIRMED.

Labor II – 1
83.) G.R. No. 164856               January 20, 2009

JUANITO A. GARCIA and ALBERTO J. DUMAGO, Petitioners,

vs.
PHILIPPINE AIRLINES, INC., Respondent.

DECISION

CARPIO MORALES, J.:

Petitioners Juanito A. Garcia and Alberto J. Dumago assail the December 5, 2003 Decision and April 16, 2004
Resolution of the Court of Appeals1 in CA-G.R. SP No. 69540 which granted the petition for certiorari of respondent,
Philippine Airlines, Inc. (PAL), and denied petitioners’ Motion for Reconsideration, respectively. The dispositive
portion of the assailed Decision reads:

WHEREFORE, premises considered and in view of the foregoing, the instant petition is hereby GIVEN DUE
COURSE. The assailed November 26, 2001 Resolution as well as the January 28, 2002 Resolution of public
respondent National Labor Relations Commission [NLRC] is hereby ANNULLED and SET ASIDE for having been
issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Consequently, the Writ of
Execution and the Notice of Garnishment issued by the Labor Arbiter are hereby likewise ANNULLED and SET
ASIDE.

SO ORDERED.2

The case stemmed from the administrative charge filed by PAL against its employees-herein petitioners3 after they
were allegedly caught in the act of sniffing shabu when a team of company security personnel and law enforcers
raided the PAL Technical Center’s Toolroom Section on July 24, 1995.

After due notice, PAL dismissed petitioners on October 9, 1995 for transgressing the PAL Code of
Discipline,4 prompting them to file a complaint for illegal dismissal and damages which was, by Decision of January
11, 1999,5 resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter alia, immediately comply with the
reinstatement aspect of the decision.

Prior to the promulgation of the Labor Arbiter’s decision, the Securities and Exchange Commission (SEC) placed
PAL (hereafter referred to as respondent), which was suffering from severe financial losses, under an Interim
Rehabilitation Receiver, who was subsequently replaced by a Permanent Rehabilitation Receiver on June 7, 1999.

From the Labor Arbiter’s decision, respondent appealed to the NLRC which, by Resolution of January 31, 2000,
reversed said decision and dismissed petitioners’ complaint for lack of merit.6

Petitioners’ Motion for Reconsideration was denied by Resolution of April 28, 2000 and Entry of Judgment was
issued on July 13, 2000.7

Subsequently or on October 5, 2000, the Labor Arbiter issued a Writ of Execution (Writ) respecting
the reinstatement aspect of his January 11, 1999 Decision, and on October 25, 2000, he issued a Notice of
Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the Notice while petitioners moved
to release the garnished amount.

In a related move, respondent filed an Urgent Petition for Injunction with the NLRC which, by Resolutions of
November 26, 2001 and January 28, 2002, affirmed the validity of the Writ and the Notice issued by the Labor
Arbiter but suspended and referred the action to the Rehabilitation Receiver for appropriate action.

Respondent elevated the matter to the appellate court which issued the herein challenged Decision and Resolution
nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a subsequent finding of a valid
dismissal removes the basis for implementing the reinstatement aspect of a labor arbiter’s decision (the first
Labor II – 1
ground), and (2) the impossibility to comply with the reinstatement order due to corporate rehabilitation provides a
reasonable justification for the failure to exercise the options under Article 223 of the Labor Code (the second
ground).

By Decision of August 29, 2007, this Court PARTIALLY GRANTED the present petition and effectively reinstated the
NLRC Resolutions insofar as it suspended the proceedings, viz:

Since petitioners’ claim against PAL is a money claim for their wages during the pendency of PAL’s appeal to the
NLRC, the same should have been suspended pending the rehabilitation proceedings. The Labor Arbiter, the
NLRC, as well as the Court of Appeals should have abstained from resolving petitioners’ case for illegal dismissal
and should instead have directed them to lodge their claim before PAL’s receiver.

However, to still require petitioners at this time to re-file their labor claim against PAL under peculiar circumstances
of the case– that their dismissal was eventually held valid with only the matter of reinstatement pending appeal
being the issue– this Court deems it legally expedient to suspend the proceedings in this case.

WHEREFORE, the instant petition is PARTIALLY GRANTED in that the instant proceedings herein are
SUSPENDED until further notice from this Court. Accordingly, respondent Philippine Airlines, Inc. is hereby
DIRECTED to quarterly update the Court as to the status of its ongoing rehabilitation. No costs.

SO ORDERED.8 (Italics in the original; underscoring supplied)

By Manifestation and Compliance of October 30, 2007, respondent informed the Court that the SEC, by Order of
September 28, 2007, granted its request to exit from rehabilitation proceedings.9

In view of the termination of the rehabilitation proceedings, the Court now proceeds to resolve the remaining
issue for consideration, which is whether petitioners may collect their wages during the period between the
Labor Arbiter’s order of reinstatement pending appeal and the NLRC decision overturning that of the Labor
Arbiter, now that respondent has exited from rehabilitation proceedings.

Amplification of the First Ground

The appellate court counted on as its first ground the view that a subsequent finding of a valid dismissal removes
the basis for implementing the reinstatement aspect of a labor arbiter’s decision.

On this score, the Court’s attention is drawn to seemingly divergent decisions concerning reinstatement pending
appeal or, particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as
expounded in a line of cases including Air Philippines Corp. v. Zamora,10 while on the other is the recent case
of Genuino v. National Labor Relations Commission.11 At the core of the seeming divergence is the application of
paragraph 3 of Article 223 of the Labor Code which reads:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the
reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the
option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the
execution for reinstatement provided herein. (Emphasis and underscoring supplied)

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the
part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal
until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal
period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever
salary he received for he is entitled to such, more so if he actually rendered services during the period.12 (Emphasis
in the original; italics and underscoring supplied)

Labor II – 1
In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive
wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it is
ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer to
comply therewith.13

The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed employee on payroll reinstatement to refund the
salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the
dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining
agreement provisions, and company practices. However, if the employee was reinstated to work during the
pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered
without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based
on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3,
1994 NLRC Decision.14 (Emphasis, italics and underscoring supplied)

It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was found
to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was
required to refund the salaries received on payroll reinstatement. In fact, in a catena of cases,15 the Court did not
order the refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal of
the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the rationale
of reinstatement pending appeal.

x x x [T]he law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions
of the 1987 Constitution on labor and the working man.

xxxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as
to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also
expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability.

xxxx

x x x In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently
overwhelming reason for its execution pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act
is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing
threat or danger to the survival or even the life of the dismissed or separated employee and his family.16

The social justice principles of labor law outweigh or render inapplicable the civil law doctrine of unjust enrichment
espoused by Justice Presbitero Velasco, Jr. in his Separate Opinion. The constitutional and statutory precepts
portray the otherwise "unjust" situation as a condition affording full protection to labor.

Labor II – 1
Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the
"refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a
dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries
received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable
decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll
reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll
reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior to Genuino, it
is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned
employees declining payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also institutes a
scheme unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve
as a bond posted in installment by the employer. For in the event of a reversal of the Labor Arbiter’s decision
ordering reinstatement, the employer gets back the same amount without having to spend ordinarily for bond
premiums. This circumvents, if not directly contradicts, the proscription that the "posting of a bond [even a cash
bond] by the employer shall not stay the execution for reinstatement."17

In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund
the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the
prevailing doctrine on reinstatement pending appeal vis-à-vis the effect of a reversal on appeal.

Respondent insists that with the reversal of the Labor Arbiter’s Decision, there is no more basis to enforce the
reinstatement aspect of the said decision. In his Separate Opinion, Justice Presbitero Velasco, Jr. supports this
argument and finds the prevailing doctrine in Air Philippines and allied cases inapplicable because, unlike the
present case, the writ of execution therein was secured prior to the reversal of the Labor Arbiter’s decision.

The proposition is tenuous. First, the matter is treated as a mere race against time. The discussion stopped there
without considering the cause of the delay. Second, it requires the issuance of a writ of execution despite the
immediately executory nature of the reinstatement aspect of the decision. In Pioneer Texturing Corp. v.
NLRC,18 which was cited in Panuncillo v. CAP Philippines, Inc.,19 the Court observed:

x x x The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be immediately
executory even pending appeal and the posting of a bond by the employer shall not stay the execution for
reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately
enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites
for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of
Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of
execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a
scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In
other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we
so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223
will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have
ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific
purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be
remedied. x x x In introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No.
6715, Congress should not be considered to be indulging in mere semantic exercise. x x x20 (Italics in the original;
emphasis and underscoring supplied)

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on
appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during
the period of appeal until reversal by the higher court.21 It settles the view that the Labor Arbiter's order of
reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms
and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the
options in the alternative, employer must pay the employee’s salaries.22
Labor II – 1
Amplification of the Second Ground

The remaining issue, nonetheless, is resolved in the negative on the strength of the second ground relied upon by
the appellate court in the assailed issuances. The Court sustains the appellate court’s finding that the peculiar
predicament of a corporate rehabilitation rendered it impossible for respondent to exercise its option under the
circumstances.

The spirit of the rule on reinstatement pending appeal animates the proceedings once the Labor Arbiter issues the
decision containing an order of reinstatement. The immediacy of its execution needs no further
elaboration. Reinstatement pending appeal necessitates its immediate execution during the pendency of the appeal,
if the law is to serve its noble purpose. At the same time, any attempt on the part of the employer to evade or delay
its execution, as observed in Panuncillo and as what actually transpired in Kimberly,23 Composite,24 Air
Philippines,25 and Roquero,26 should not be countenanced.

After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be barred from
collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal
was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending appeal was not
executed prior to its reversal; and (2) the delay must not be due to the employer’s unjustified act or omission. If the
delay is due to the employer’s unjustified refusal, the employer may still be required to pay the salaries
notwithstanding the reversal of the Labor Arbiter’s decision.

In Genuino, there was no showing that the employer refused to reinstate the employee, who was the Treasury Sales
Division Head, during the short span of four months or from the promulgation on May 2, 1994 of the Labor Arbiter’s
Decision up to the promulgation on September 3, 1994 of the NLRC Decision. Notably, the former NLRC Rules of
Procedure did not lay down a mechanism to promptly effectuate the self-executory order of reinstatement, making it
difficult to establish that the employer actually refused to comply.

In a situation like that in International Container Terminal Services, Inc. v. NLRC27 where it was alleged that the
employer was willing to comply with the order and that the employee opted not to pursue the execution of the order,
the Court upheld the self-executory nature of the reinstatement order and ruled that the salary automatically accrued
from notice of the Labor Arbiter's order of reinstatement until its ultimate reversal by the NLRC. It was later
discovered that the employee indeed moved for the issuance of a writ but was not acted upon by the Labor Arbiter.
In that scenario where the delay was caused by the Labor Arbiter, it was ruled that the inaction of the Labor Arbiter
who failed to act upon the employee’s motion for the issuance of a writ of execution may no longer adversely affect
the cause of the dismissed employee in view of the self-executory nature of the order of reinstatement.28

The new NLRC Rules of Procedure, which took effect on January 7, 2006, now require the employer to submit
a report of compliance within 10 calendar days from receipt of the Labor Arbiter’s decision,29 disobedience to which
clearly denotes a refusal to reinstate. The employee need not file a motion for the issuance of the writ of execution
since the Labor Arbiter shall thereafter motu proprio issue the writ. With the new rules in place, there is hardly
any difficulty in determining the employer’s intransigence in immediately complying with the order.

In the case at bar, petitioners exerted efforts30 to execute the Labor Arbiter’s order of reinstatement until they were
able to secure a writ of execution, albeit issued on October 5, 2000 after the reversal by the NLRC of the Labor
Arbiter’s decision. Technically, there was still actual delay which brings to the question of whether the delay was due
to respondent’s unjustified act or omission.

It is apparent that there was inaction on the part of respondent to reinstate them, but whether such omission was
justified depends on the onset of the exigency of corporate rehabilitation.

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before any court,
tribunal or board against the corporation shall ipso jure be suspended.31 As stated early on, during the pendency of
petitioners’ complaint before the Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation

Labor II – 1
Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a
Permanent Rehabilitation Receiver.

Case law recognizes that unless there is a restraining order, the implementation of the order of reinstatement is
ministerial and mandatory.32 This injunction or suspension of claims by legislative fiat33 partakes of the nature
of a restraining order that constitutes a legal justification for respondent’s non-compliance with the
reinstatement order. Respondent’s failure to exercise the alternative options of actual reinstatement and
payroll reinstatement was thus justified. Such being the case, respondent’s obligation to pay the salaries
pending appeal, as the normal effect of the non-exercise of the options, did not attach.

While reinstatement pending appeal aims to avert the continuing threat or danger to the survival or even the life of
the dismissed employee and his family, it does not contemplate the period when the employer-corporation itself is
similarly in a judicially monitored state of being resuscitated in order to survive.

The parallelism between a judicial order of corporation rehabilitation as a justification for the non-exercise of its
options, on the one hand, and a claim of actual and imminent substantial losses as ground for retrenchment, on the
other hand, stops at the red line on the financial statements. Beyond the analogous condition of financial gloom, as
discussed by Justice Leonardo Quisumbing in his Separate Opinion, are more salient distinctions. Unlike the ground
of substantial losses contemplated in a retrenchment case, the state of corporate rehabilitation was judicially pre-
determined by a competent court and not formulated for the first time in this case by respondent.

More importantly, there are legal effects arising from a judicial order placing a corporation under rehabilitation.
Respondent was, during the period material to the case, effectively deprived of the alternative choices under Article
223 of the Labor Code, not only by virtue of the statutory injunction but also in view of the interim relinquishment of
management control to give way to the full exercise of the powers of the rehabilitation receiver. Had there been no
need to rehabilitate, respondent may have opted for actual physical reinstatement pending appeal to optimize the
utilization of resources. Then again, though the management may think this wise, the rehabilitation receiver may
decide otherwise, not to mention the subsistence of the injunction on claims.

In sum, the obligation to pay the employee’s salaries upon the employer’s failure to exercise the alternative options
under Article 223 of the Labor Code is not a hard and fast rule, considering the inherent constraints of corporate
rehabilitation.

WHEREFORE, the petition is PARTIALLY DENIED. Insofar as the Court of Appeals Decision of December 5, 2003
and Resolution of April 16, 2004 annulling the NLRC Resolutions affirming the validity of the Writ of Execution and
the Notice of Garnishment are concerned, the Court finds no reversible error.

Labor II – 1
 84.) G.R. No. 192924, November 26, 2014

PHILIPPINE AIRLINES, INC., Petitioner, v. REYNALDO V. PAZ, Respondent.

DECISION

REYES, J.:

Before this Court is a petition for review on certiorari  1 filed under Rule 45 of the Rules of Court by
Philippine Airlines, Inc. (PAL), seeking to annul and set aside the Amended Decision2 dated June 29,
2010 of the Court of Appeals (CA) in CA-G.R. SP No. 75618.

Reynaldo V. Paz (respondent) was a former commercial pilot of PAL and a member of the Airlines
Pilots Association of the Philippines (ALPAP), the sole and exclusive bargaining representative of all
the pilots in PAL.

On December 9, 1997, ALPAP filed a notice of strike with the National Conciliation and Mediation
Board of the Department of Labor and Employment (DOLE). Pursuant to Article 263(g) of the Labor
Code, the DOLE Secretary assumed jurisdiction over the labor dispute and enjoined the parties from
committing acts which will further exacerbate the situation.3

On June 5, 1998, notwithstanding the directive of the DOLE Secretary, the ALPAP officers and
members staged a strike and picketed at the PAL’s premises. To control the situation, the DOLE
Secretary issued a return-to-work order on June 7, 1998, directing all the striking officers and
members of ALPAP to return to work within 24 hours from notice of the order. The said order was
served upon the officers of ALPAP on June 8, 1998 by the DOLE Secretary himself. Even then, the
striking members of ALPAP did not report for work.4

On June 25, 1998, Atty. Joji Antonio, the counsel for ALPAP, informed the members of the union that
she has just received a copy of the return-to-work order and that they have until the following day
within which to comply. When the striking members of the ALPAP reported for work on the following
day, the security guards of PAL denied them entry.5

On June 13, 1998, the DOLE Secretary issued a resolution on the case from which both parties filed a
motion for reconsideration. Pending the resolution of the motions, PAL filed a petition for approval of
rehabilitation plan and for appointment of a rehabilitation receiver with the Securities and Exchange
Commission (SEC), claiming serious financial distress brought about by the strike. Subsequently, on
June 23, 1998, the SEC appointed a rehabilitation receiver for PAL and declared the suspension of all
claims against it.6

On June 1, 1999, the DOLE Secretary resolved the motions for reconsideration filed by both parties
and declared the strike staged by ALPAP illegal and that the participants thereof are deemed to have
lost their employment.7

On June 25, 1999, the respondent filed a complaint for illegal dismissal against PAL for not accepting
him back to work, claiming non-participation in the illegal strike. In his position paper, he alleged
that on the day the ALPAP staged a strike on June 5, 1998, he was off-duty from work and was in
Iligan City. However, when he reported back to work on June 12, 1998, after a week-long break, he
was no longer allowed to enter PAL’s premises in Nichols, Pasay City.8

The respondent further alleged that on June 25, 1998, he learned that the DOLE Secretary issued a
return-to-work order, requiring all the striking pilots to return to work within 24 hours from notice.
Notwithstanding his non-participation in the strike, he signed the logbook at the entrance of PAL’s

Labor II – 1
office on the following day. When he tried to report for work, however, he was denied entry by the
PAL’s security guards.9

For its part, PAL claimed that the respondent was among the participants of the strike staged by
ALPAP on June 5, 1998 who did not heed to the return-to-work order issued on June 7, 1998 by the
DOLE Secretary. The said order directed all the participants of the strike to return to work within 24
hours from notice thereof. However, ALPAP and its counsel unjustifiably refused to receive the copy
of the order and was therefore deemed served. The 24-hour deadline for the pilots to return to work
expired on June 9, 1998, without the respondent reporting back to work. Subsequently, the DOLE
Secretary issued the Resolution dated June 1, 1999, declaring that the striking pilots have lost their
employment for defying the return-to-work order. Thus, PAL argued that the respondent’s charge of
illegal dismissal is utterly without merit.10

On March 5, 2001, the Labor Arbiter (LA) rendered a Decision,11 holding that the respondent was
illegally dismissed and ordered that he be reinstated to his former position without loss of seniority
rights and other privileges and paid his full backwages inclusive of allowances and other benefits
computed from June 12, 1998 up to his actual reinstatement. The dispositive portion of the decision
reads, as follows:chanroblesvirtuallawlibrary

WHEREFORE, judgment is hereby rendered:

1. Declaring that this Arbitration Branch has jurisdiction over the causes of action raised by the
[respondent] in this case;

2. Declaring that the causes of action raised in the complaint in this case have not been barred by
prior judgment of the Secretary of Labor and Employment in his Resolution of June 1, 1999;

3. Declaring that the termination of the services of the [respondent] was not for any just or
authorized cause and also without due process and therefore illegal;

4. Ordering Philippine Airlines, Inc. to reinstate immediately upon receipt of this decision
[respondent] Reynaldo V. Paz to his former position as commercial pilot without loss of seniority
rights and other privileges and to pay him his full backwages inclusive of allowances and other
benefits or their monetary equivalent computed from June 12, 1998 up to his actual reinstatement
even pending appeal but the respondent has the option to actually reinstate [the respondent] to his
former position or to reinstate him merely in payroll. As of September 5, 2000, the full backwages
due to the [respondent] total P2,629,420.00;

5. Ordering Philippine Airlines, Inc. to pay the [respondent] the following: chanroblesvirtuallawlibrary

Productivity Pay (P22,383.62 x 27

P604,357.74 
months……
Retirement Fund Contribution  
(P9,800.00 x 27 months)
264,600.00 
………………..
PODF (P4,663.25 x 27 months)
125,907.75 
……………….....
Sick Leave (P3,000.62 x 42 days)
126,026.04 
………………..
Vacation Leave (P3,000.62 x 42
125,026.04 
days)…………..
Rice Subsidy (P600.00 x 27
16,200.00 
months)…………….
13th Month Pay (P93,265.00 x 2
188,030.00 
years)…………..
Longevity Pay (P500.00 x 2 years) 1,000.00 
Labor II – 1
………………
6. Ordering Philippine Airlines, Inc. to pay [the respondent] attorney’s fees equivalent to 10% of the
whole monetary award (Art. III, Labor Code);

7. Ordering Philippine Airlines, Inc. to pay [the respondent] moral damages equivalent to Five
Hundred Thousand Pesos (P500,00[0].00) and exemplary damages of Five Hundred Thousand Pesos
(P500,000.00)

SO ORDERED.12
Unyielding, PAL appealed the foregoing decision to the National Labor Relations Commission (NLRC).
Pending appeal, the respondent filed a motion for partial execution of the reinstatement aspect of the
decision. The LA granted the said motion and issued a partial writ of execution on May 25, 2001.

Subsequently, on June 27, 2001, the NLRC rendered a Resolution,13 reversing the LA decision. The
NLRC ruled that the pieces of evidence presented by PAL proved that the respondent participated in
the strike and defied the return-to-work order of the DOLE Secretary; hence, he is deemed to have
lost his employment. The pertinent portions of the decision read: chanroblesvirtuallawlibrary

Indeed, other than [the respondent’s] self-serving assertions, he has failed to substantiate his claim
that he was in Iligan City and that he reported for work a week after June 5, 1998. [PAL], on the
other hand, has presented photographs of the complainant picketing [at the PAL’s] premises on June
15 & 26, 1998. x x x

xxxx

In sum, [PAL’s] concrete evidence submitted in the proceedings below should prevail over the self-
serving assertions of [the respondent]. Consequently, we are of the view that [PAL] acted within its
rights when it refused to accept [the respondent] when he reported for work on June 26, 1998. This
is consistent with the finding[s] of the DOLE Secretary when he declared the strikers to have lost
their employment status. x x x.

xxxx

WHEREFORE, premises considered, the appeal is hereby GRANTED, and the decision dated March 5,
2001, is REVERSED and SET ASIDE for utter lack of merit.

SO ORDERED.14
Notwithstanding the reversal of the LA decision, the respondent pursued his move for the issuance of
a writ of execution, claiming that he was entitled to reinstatement salaries which he supposedly
earned during the pendency of the appeal to the NLRC. On August 28, 2001, the LA granted the
motion and issued the corresponding writ of execution.15

On September 17, 2001, the LA issued an Order,16 clarifying the respondent’s entitlement to

reinstatement salaries. He ratiocinated that the order of reinstatement is immediately executory even
pending appeal and that under Article 223 of the Labor Code, the employer has the option to admit
the employee back to work or merely reinstate him in the payroll. Considering, however, that there
was no physical reinstatement, the respondent, as a matter of right, must be reinstated in the
payroll. The accrued salaries may now be the subject of execution despite the NLRC’s reversal of the
decision.

PAL appealed the LA Order dated September 17, 2001 to the NLRC, arguing that the writ of
execution lacked factual and legal basis considering that the NLRC reversed and set aside the LA
decision and categorically declared the order of reinstatement as totally devoid of merit. It contended
that entitlement to salaries pending appeal presupposes a finding that the employee is entitled to
reinstatement. Absent such finding, the employee is not entitled to reinstatement salaries and the
writ of execution issued pursuant thereto is a complete nullity.17
Labor II – 1
On June 28, 2002, the NLRC rendered a Resolution,18 sustaining the award of reinstatement salaries
to the respondent albeit suspending its execution in view of the fact that PAL was under rehabilitation
receivership. PAL filed a motion for reconsideration but the NLRC denied the same in its
Resolution19 dated November 22, 2002.

Unperturbed, PAL filed a petition for certiorari with the CA, questioning the NLRC Resolution dated
June 28, 2002. Subsequently, in a Decision20 dated January 31, 2005, the CA affirmed with
modification the NLRC Resolution dated June 28, 2002, the dispositive portion of which reads, as
follows:chanroblesvirtuallawlibrary

WHEREFORE, the NLRC Resolution dated June 28, 2002 is AFFIRMED with the
MODIFICATION that, in lieu of reinstatement salaries, petitioner Philippine Airlines, Inc. is ordered
to pay respondent Paz separation pay equivalent to one month salary for every year of service, to be
computed from the time respondent commenced employment with petitioner PAL until the
time the Labor Arbiter issued the writ ordering respondent’s reinstatement, i.e., on May
25, 2001 .

SO ORDERED.21
The CA ruled that while the respondent is entitled to reinstatement, the prevailing circumstances
rendered the same difficult if not impossible to execute. It noted that at the time the reinstatement
was ordered, there was no vacant B747-400 pilot position available for the respondent. Further
complicating the situation is the fact that PAL has been under receivership since July 1998. Thus, in
lieu of reinstatement salaries, the CA ordered PAL to pay the respondent separation pay equivalent to
one (1) month salary for every year of service.22

PAL filed a motion for reconsideration of the CA decision. Subsequently, the CA rendered the assailed
Amended Decision23 dated June 29, 2010, holding thus: chanroblesvirtuallawlibrary

Accordingly, compliance with the reinstatement order is not affected by the fact that private
respondent’s previous position had been filled-up. In reinstatement pending appeal, payroll
reinstatement is an alternative to actual reinstatement. Hence, public respondent did not err when it
upheld the Labor Arbiter that private respondent is entitled to reinstatement salaries during the
period of appeal.

WHEREFORE, premises considered, the modification contained in Our January 31, 2005 Decision is
DELETED and SET ASIDE. The June 28, 2002 Resolution of the National Labor Relations Commission
is hereby REINSTATED in toto.

SO ORDERED.24
On August 3, 2010, PAL filed the instant petition with the Court, contending that the CA
acted in a manner contrary to law and jurisprudence when it upheld the award of
reinstatement salaries to the respondent.25

The petition is meritorious.

The same issue had been raised and addressed by the Court in the case of Garcia v. Philippine
Airlines, Inc.26 In the said case, the Court deliberated on the application of Paragraph 3, Article 223 of
the Labor Code in light of the apparent divergence in its interpretation, specifically on the
contemplation of the reinstatement aspect of the LA decision. The pertinent portion of the provision
reads, thus: chanroblesvirtuallawlibrary

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar
as the reinstatement aspect is concerned, shall immediately be executory, pending appeal .
The employee shall either be admitted back to work under the same terms and conditions prevailing
prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll.
The posting of a bond by the employer shall not stay the execution for reinstatement provided
herein.27 (Emphasis and underscoring in the original)
Labor II – 1
Briefly, in Garcia, the petitioners were dismissed by their employer, respondent PAL, after they were
allegedly caught in the act of sniffing shabu when a team of company security personnel and law
enforcers raided the PAL Technical Center’s Toolroom Section. After they filed a complaint for illegal
dismissal, respondent PAL was placed under rehabilitation receivership due to serious financial
losses. Eventually, the LA resolved the case in favor of the petitioners and ordered their immediate
reinstatement. Upon appeal, however, the NLRC reversed the LA decision and dismissed the
complaint. Even then, the LA issued a writ of execution, with respect to the reinstatement aspect of
the decision, and issued a notice of garnishment. Respondent PAL filed an urgent petition for
injunction with the NLRC but the latter, by way of Resolutions dated November 26, 2001 and January
28, 2002, affirmed the validity of the writ and the notice issued by the LA but suspended and
referred the action to the rehabilitation receiver. On appeal, the CA ruled in favor of respondent PAL
and nullified the NLRC resolutions, holding that (1) a subsequent finding of a valid dismissal removes
the basis for the reinstatement aspect of a LA decision, and (2) the impossibility to comply with the
reinstatement order due to corporate rehabilitation justifies respondent PAL’s failure to exercise the
options under Article 223 of the Labor Code. When the case was further elevated to this Court, the
petition was partially granted and reinstated the NLRC resolutions insofar as it suspended the
proceedings. Subsequently, respondent PAL notified the Court that it has exited from the
rehabilitation proceedings. The Court then proceeded to determine the main issue of whether the
petitioners therein are entitled to collect salaries pertaining to the period when the LA’s order of
reinstatement is pending appeal to the NLRC until it was reversed.

The factual milieu of the instant case resembles that of Garcia. The respondent herein obtained a
favorable ruling from the LA in the complaint for illegal dismissal case he filed against PAL but the
same was reversed on appeal by the NLRC. Also, PAL was under rehabilitation receivership during the
entire period that the illegal dismissal case was being heard. A similar question is now being
raised, i.e., whether the respondent may collect reinstatement salaries which he is supposed to have
received from the time PAL received the LA decision, ordering his reinstatement, until the same was
overturned by the NLRC.

The rule is that the employee is entitled to reinstatement salaries notwithstanding the reversal of the
LA decision granting him said relief. In Roquero v. Philippine Airlines,28 the Court underscored that it
is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee
during the period of appeal until reversal by the higher court. This is so because the order of
reinstatement is immediately executory. Unless there is a restraining order issued, it is ministerial
upon the LA to implement the order of reinstatement. The unjustified refusal of the employer to
reinstate a dismissed employee entitles him to payment of his salaries effective from the time the
employer failed to reinstate him.29

In Garcia, however, the Court somehow relaxed the rule by taking into consideration the cause of
delay in executing the order of reinstatement of the LA. It was declared, thus: chanroblesvirtuallawlibrary

After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be barred from
collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending
appeal was without fault on the part of the employer.

The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement
pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the
employer’s unjustified act or omission. If the delay is due to the employer’s unjustified refusal, the
employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiter’s
decision.30 (Italics ours and emphasis and underscoring deleted)
It is clear from the records that PAL failed to reinstate the respondent pending appeal of the LA
decision to the NLRC. It can be recalled that the LA rendered the decision ordering the reinstatement
of the respondent on March 5, 2001. And, despite the self-executory nature of the order of
reinstatement, the respondent nonetheless secured a partial writ of execution on May 25, 2001. Even
then, the respondent was not reinstated to his former position or even through payroll.

Labor II – 1
A scrutiny of the circumstances, however, will show that the delay in reinstating the
respondent was not due to the unjustified refusal of PAL to abide by the order but because
of the constraints of corporate rehabilitation. It bears noting that a year before the respondent
filed his complaint for illegal dismissal on June 25, 1999, PAL filed a petition for approval of
rehabilitation plan and for appointment of a rehabilitation receiver with the SEC. On June 23, 1998,
the SEC appointed an Interim Rehabilitation Receiver. Thereafter, the SEC issued an Order31 dated
July 1, 1998, suspending all claims for payment against PAL.

The inopportune event of PAL’s entering rehabilitation receivership justifies the delay or
failure to comply with the reinstatement order of the LA. Thus, in Garcia, the Court held: chanroblesvirtuallawlibrary

It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims
before any court, tribunal or board against the corporation shall ipso jure be suspended. As stated
early on, during the pendency of petitioners’ complaint before the Labor Arbiter, the SEC placed
respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision,
the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.

Case law recognizes that unless there is a restraining order, the implementation of the order of
reinstatement is ministerial and mandatory. This injunction or suspension of claims by legislative fiat
partakes of the nature of a restraining order that constitutes a legal justification for respondent’s
non-compliance with the reinstatement order. Respondent’s failure to exercise the alternative
options of actual reinstatement and payroll reinstatement was thus justified. Such being
the case, respondent’s obligation to pay the salaries pending appeal, as the normal effect
of the non-exercise of the options, did not attach. 32 (Citations omitted)
In light of the fact that PAL’s failure to comply with the reinstatement order was justified
by the exigencies of corporation rehabilitation, the respondent may no longer claim
salaries which he should have received during the period that the LA decision ordering his
reinstatement is still pending appeal until it was overturned by the NLRC. Thus, the CA
committed a reversible error in recognizing the respondent’s right to collect reinstatement
salaries albeit suspending its execution while PAL is still under corporate rehabilitation.

WHEREFORE, the petition is GRANTED. The Amended Decision dated June 29, 2010 of the Court of
Appeals in CA-G.R. SP No. 75618 is hereby REVERSED and SET ASIDE. Respondent Reynaldo V.
Paz is not entitled to the payment of reinstatement salaries.

Labor II – 1
 85.) [G.R. No. 168501 : January 31, 2011]

ISLRIZ TRADING/ VICTOR HUGO LU, PETITIONER, VS. EFREN CAPADA, LAURO LICUP,

NORBERTO NIGOS, RONNIE ABEL, GODOFREDO MAGNAYE, ARNEL SIBERRE, EDMUNDO
CAPADA, NOMERLITO MAGNAYE AND ALBERTO DELA VEGA, RESPONDENTS.

DECISION

DEL CASTILLO, J.:

We reiterate in this petition the settled view that employees are entitled to their accrued salaries
during the period between the Labor Arbiter's order of reinstatement pending appeal and the
resolution of the National Labor Relations Commission (NLRC) overturning that of the Labor Arbiter. 
Otherwise stated, even if the order of reinstatement of the Labor Arbiter is reversed on appeal, the
employer is still obliged to reinstate and pay the wages of the employee during the period of appeal
until reversal by a higher court or tribunal.  In this case, respondents are entitled to their accrued
salaries from the time petitioner received a copy of the Decision of the Labor Arbiter declaring
respondents' termination illegal and ordering their reinstatement up to the date of the NLRC
resolution overturning that of the Labor Arbiter. cralaw

This Petition for Review on Certiorari assails the Decision[1] dated March 18, 2005 of the Court of
Appeals (CA) in CA-G.R. SP No. 84744 which dismissed the petition for certiorari before it, as well as
the Resolution[2] dated June 16, 2005 which denied the motion for reconsideration thereto. cralaw

Factual Antecedents

Respondents Efren Capada, Lauro Licup, Norberto Nigos and Godofredo Magnaye were drivers while
respondents Ronnie Abel, Arnel Siberre, Edmundo Capada, Nomerlito Magnaye and Alberto Dela Vega
were helpers of Islriz Trading, a gravel and sand business owned and operated by petitioner Victor
Hugo Lu. Claiming that they were illegally dismissed, respondents filed a Complaint[3] for illegal
dismissal and non-payment of overtime pay, holiday pay, rest day pay, allowances and separation
pay against petitioner on August 9, 2000 before the Labor Arbiter.  On his part, petitioner imputed
abandonment of work against respondents. cralaw

Proceedings before the Labor Arbiter and the NLRC

On December 21, 2001, Labor Arbiter Waldo Emerson R. Gan (Gan) rendered a Decision[4] in this
wise:

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

1. Declaring respondent ISLRIZ TRADING guilty of illegal dismissal.

2. Ordering respondent to reinstate complainants to their former positions without loss of seniority
rights and the payment of full backwages from date of dismissal to actual reinstatement which are
computed as follows: (As of date of decision);

1.  EFREN CAPADA P 102,400.00 (6,400.00X16)

2.  LAURO LICUP 87,040.00 (5,440.00X16)
3.  NORBERTO NIGOS 87,040.00 (5,440.00X16)
4.  RONNIE ABEL 76,800.00 (4,800.00X16)
5.  GODOFREDO MAGNAYE 102,400.00 (6,400.00X16)
6.  ARNEL SIBERRE 51,200.00 (3,200.00X16)
7. EDMUNDO CAPADA 76,800.00 (4,800.00X16)

Labor II – 1
8. NOMERLITO MAGNAYE 76,800.00 (4,800.00X16)
9. ALBERTO DELA VEGA 51,200.00 (3,200.00X16)

3. Ordering respondent to pay complainants 10% of the total monetary award as attorney's fees.

All other claims are dismissed for lack of merit. cralaw

SO ORDERED.[5]

Aggrieved, petitioner appealed[6] to the NLRC which granted the appeal. The NLRC set aside the
Decision of Labor Arbiter Gan in a Resolution[7] dated September 5, 2002.  Finding that respondents'
failure to continue working for petitioner was neither caused by termination nor abandonment of
work, the NLRC ordered respondents' reinstatement but without backwages.  The dispositive portion
of said Resolution reads as follows:

WHEREFORE, premises considered, the appeal is GRANTED and the Decision dated 21 December
2001 is hereby ordered SET ASIDE.

A New Decision is hereby rendered finding that the failure to work of complainants-appellees is
neither occasioned by termination (n)or abandonment of work, hence, respondents-appellants shall
reinstate complainants-appellees to their former positions without backwages within ten (10) days
from receipt of this Resolution.cralaw

SO ORDERED.[8]

Respondents filed a Motion for Reconsideration[9] thereto but same was likewise denied in a
Resolution[10] dated November 18, 2002. This became final and executory on December 7, 2002.[11]

On December 9, 2003, however, respondents filed with the Labor Arbiter an Ex-Parte Motion
to Set Case for Conference with Motion.[12]  They averred therein that since the Decision of
Labor Arbiter Gan ordered their reinstatement, a Writ of Execution[13] dated April 22, 2002 was
already issued for the enforcement of its reinstatement aspect as same is immediately executory
even pending appeal.  But this notwithstanding and despite the issuance and subsequent
finality of the NLRC Resolution which likewise ordered respondents'
reinstatement, petitioner still refused to reinstate them.  Thus, respondents prayed that in
view of the orders of reinstatement, a computation of the award of backwages be made
and that an Alias Writ of Execution for its enforcement be issued.

The case was then set for pre-execution conference on January 29, February 24 and March 5, 2004. 
Both parties appeared thereat but failed to come to terms on the issue of the monetary award. 
Hence, the office of the Labor Arbiter through Fiscal Examiner II Ma. Irene T. Trinchera (Fiscal
Examiner Trinchera) issued an undated Computation[14] of respondents' accrued salaries from January
1, 2002 to January 30, 2004 or for a total of 24.97 months in the amount of P1,110,665.60
computed as follows: cralaw

Accrued Salary from January 1, 2002 to January 30, 2004 = 24.97 months
     
Efren Capada P 6,400.00 x 24.97 months P  159,808.00
Lauro Licup P 5,440.00 x 24.97 months P  135,836.80
Norberto Nigos P 5,440.00 x 24.97 months P  135,836.80
Ronnie Abel P 4,800.00 x 24.97 months P  119,856.00
Godofredo Magnaye P 6,400.00 x 24.97 months P  159,808.00
Arnel Siberre P 3,200.00 x 24.97 months P  79, 904.00
Labor II – 1
Edmundo Capada P 4,800.00 x 24.97 months P  119, 856.00
Nomerlito Magnaye  P 4,800.00 x 24.97 months P  119, 856.00
Alberto de la Vega P 3,200.00 x 24.97 months P  79, 904.00
Total  P 1,110,665.60
Petitioner questioned this computation in his Motion/Manifestation[15] claiming that said computation
was without any factual or legal basis considering that Labor Arbiter Gan's Decision had already been
reversed and set aside by the NLRC and that therefore there should be no monetary award. cral aw

Nevertheless, Labor Arbiter Danna M. Castillon (Castillon) still issued a Writ of Execution[16] dated

March 9, 2004 to enforce the monetary award in accordance with the abovementioned computation. 
Accordingly, the Sheriff issued a Notice of Sale/Levy on Execution of Personal Property[17] by virtue of
which petitioner's properties were levied and set for auction sale on March 29, 2004.  In an effort to
forestall this impending execution, petitioner then filed a Motion to Quash Writ of Execution with
Prayer to Hold in Abeyance of Auction Sale[18] and a Supplemental Motion to Quash/Stop Auction
Sale.[19]  He also served upon the Sheriff a letter of protest.[20]  All of these protest actions proved
futile as the Sheriff later submitted his Report dated March 30, 2004 informing the Labor Arbiter that
he had levied some of petitioner's personal properties and sold them in an auction sale where
respondents were the only bidders.  After each of the respondents entered a bid equal to their
individual shares in the judgment award, the levied properties were awarded to them.

Later, respondents claimed that although petitioner's levied properties were already awarded to
them, they could not take full control, ownership and possession of said properties because petitioner
had allegedly padlocked the premises where the properties were situated.  Hence, they asked Labor
Arbiter Castillon to issue a break-open order.[21] For his part and in a last ditch effort to nullify the
writ of execution, petitioner filed a Motion to Quash Writ of Execution, Notice of Sale/Levy on
Execution of Personal Property and Auction Sale on Additional Grounds.[22]  He reiterated that since
the NLRC Resolution which reversed the Decision of the Labor Arbiter ordered respondents'
reinstatement without payment of backwages or other monetary award, only the execution of
reinstatement sans any backwages or monetary award should be enforced.  It is his position that the
Writ of Execution dated March 9, 2004 ordering the Sheriff to collect respondents' accrued salaries of
P1,110,665.60 plus P1,096.00 execution fees or the total amount of P1,111,761.60, in effect illegally
amended the said NLRC Resolution; hence, said writ of execution is null and void.  And, as the writ is
null and void, it follows that the Labor Arbiter cannot issue a break-open order.  In sum, petitioner
prayed that the Writ of Execution be quashed and all proceedings subsequent to it be declared null
and void and that respondents' Urgent Motion for Issuance of Break Open Order be denied for lack of
merit.cralaw

Both motions were resolved in an Order[23] dated June 3, 2004.  Labor Arbiter Castillon explained
therein that the monetary award subject of the questioned Writ of Execution refers to respondents'
accrued salaries by reason of the reinstatement order of Labor Arbiter Gan which is self-executory
pursuant to Article 223[24] of the Labor Code.  The Order cited Roquero v. Philippine Airlines Inc.
[25]
 where this Court ruled that employees are still entitled to their accrued salaries even if the order
of reinstatement has been reversed on appeal.  As to the application for break open order, Labor
Arbiter Castillon relied on the Sheriff's report that there is imminent danger that petitioner's
properties sold at the public auction might be transferred or removed, as in fact four of said
properties were already transferred.  Thus, she deemed it necessary to grant respondents' request
for a break open order to gain access to petitioner's premises.  The dispositive portion of said Order
reads: cralaw

WHEREFORE, premises considered, the Motion to Quash Writ of Execution [and] Notice of Sale/Levy
on Execution Sale filed by the respondent(s) [are] hereby DENIED. In view of the refusal of the
respondents' entry to its premises, Deputy Sheriff S. Diega of this Office is hereby ordered to break-
open the entrance of the premises of respondent wherein the properties are located.

For this purpose, he may secure the assistance of the local police officer having jurisdiction over the
Labor II – 1
locality where the said properties are located. cralaw

SO ORDERED.[26]

Undeterred, petitioner brought the matter to the CA through a Petition for Certiorari.

Proceedings before the Court of Appeals

Before the CA, petitioner imputed grave abuse of discretion amounting to lack or excess of
jurisdiction upon Labor Arbiter Castillon for issuing the questioned Writ of Execution and the Order
dated June 3, 2004.  He maintained that since the December 21, 2001 Decision of Labor Arbiter Gan
has already been reversed and set aside by the September 5, 2002 Resolution of the NLRC, the Writ
of Execution issued by Labor Arbiter Castillon should have confined itself to the said NLRC Resolution
which ordered respondents' reinstatement without backwages.  Hence, when Labor Arbiter Castillon
issued the writ commanding the Sheriff to satisfy the monetary award in the amount of
P1,111,761.60, she acted with grave abuse of discretion amounting to lack or excess of jurisdiction. 
For the same reason, her issuance of the Order dated June 3, 2004 denying petitioner's Motion to
Quash Writ of Execution with Prayer to Hold in Abeyance Auction Sale and granting respondents'
Urgent Motion for Issuance of Break Open Order is likewise tainted with grave abuse of discretion. 
Aside from these, petitioner also questioned the conduct of the auction sale. He likewise claimed that
he was denied due process because he was not given the opportunity to file a motion for
reconsideration of the Order denying his Motion to Quash Writ of Execution considering that a break-
open order was also made in the same Order.  For their part, respondents posited that since they
have already disposed of petitioner's levied properties, the petition has already become moot. cralaw

In a Decision[27] dated March 18, 2005, the CA quoted the June 3, 2004 Order of Labor Arbiter
Castillon and agreed with her ratiocination that pursuant to Article 223 of the Labor Code, what is
sought to be enforced by the subject Writ of Execution is the accrued salaries owing to respondents
by reason of the reinstatement order of Labor Arbiter Gan.  The CA also found as unmeritorious the
issues raised by petitioner with regard to the conduct of the auction sale.  Moreover, it did not give
weight to petitioner's claim of lack of due process considering that a motion for reconsideration of a
Writ of Execution is not an available remedy.  Thus, the CA dismissed the petition.  Petitioner's
Motion for Reconsideration[28] suffered the same fate as it was also denied in a Resolution[29] dated
June 16, 2005. cralaw

Hence, petitioner is now before this Court through this Petition for Review on Certiorari where he
presents the following issues:

1. Whether the provision of Article 223 of the Labor Code is applicable to this case x x x.

2. Whether x x x the Decision dated March 18, 2005 and the Resolution dated June 16, 2005 of
the Court of Appeals are contrary to law and jurisprudence[.]

3. Whether x x x the award of accrued salaries has legal and factual bases[.][30] cralaw

The Parties' Arguments

Petitioner contends that the assailed Decision and Resolution of the CA are contrary to law and
jurisprudence.  This is because in upholding the issuance of the questioned Writ of Execution for the
enforcement of respondents' accrued salaries, said Decision and Resolution, in effect, altered the
NLRC Resolution which only decreed respondents' reinstatement without backwages.  Moreover, he
posits that Article 223 of the Labor Code only applies when an employee has been illegally
dismissed from work.  And since in this case the NLRC ruled that respondents' failure to
continue working for petitioner was not occasioned by termination, there is no illegal
Labor II – 1
dismissal to speak of, hence, said provision of the Labor Code does not apply.  Lastly,
petitioner claims that the computation of respondents' accrued salaries in the total amount of
P1,110,665.60 has no legal and factual bases since as repeatedly pointed out by him, the NLRC
Resolution reversing the Labor Arbiter's Decision has already ordered respondents' reinstatement
without backwages after it found that there was no illegal termination.

Respondents, on the other hand, maintain that the CA did not err in applying Article 223 of the Labor
Code to the instant case.  They thus contend that the computation of their accrued salaries covering
the period during which they were supposed to have been reinstated or from January 1, 2002 to
January 30, 2004, should be upheld since same merely applied Article 223. In sum, respondents
believe that the assailed Decision and Resolution of the CA are in accord with law and jurisprudence. cralaw

Our Ruling

The petition is not meritorious.

The core issue to be resolved in this case is similar to the one determined in Garcia v. Philippine
Airlines Inc.,[31]  that is, whether respondents may collect their wages during the period between the
Labor Arbiter's order of reinstatement pending appeal and the NLRC Resolution overturning that of
the Labor Arbiter.

In order to provide a thorough discussion of the present case, an overview of Garcia is proper.

In Garcia, petitioners therein were dismissed by Philippine Airlines Inc. (PAL) after they were
allegedly caught in the act of sniffing shabu during a raid at the PAL Technical Center's Toolroom
Section. They thus filed a complaint for illegal dismissal.  In the meantime, PAL was placed under an
interim rehabilitation receivership because it was then suffering from severe financial losses. 
Thereafter, the Labor Arbiter ruled in petitioners' favor and ordered PAL to immediately comply with
the reinstatement aspect of the decision.  PAL appealed to the NLRC.  The NLRC reversed the Labor
Arbiter's Decision and dismissed petitioners' complaint for lack of merit. As petitioners' Motion for
Reconsideration thereto was likewise denied, the NLRC issued an Entry of Judgment. Notably, PAL's
Interim Rehabilitation Receiver was replaced by a Permanent Rehabilitation Receiver during the
pendency of its appeal with the NLRC.  A writ of execution with respect to the reinstatement aspect
of the Labor Arbiter's Decision was then issued and pursuant thereto, a Notice of Garnishment was
likewise issued.  To stop this, PAL filed an Urgent Petition for Injunction with the NLRC.  While the
NLRC suspended and referred the action to the rehabilitation receiver, it however, likewise affirmed
the validity of the writ so that PAL appealed to the CA.  Fortunately for PAL, the CA nullified the
assailed NLRC Resolutions on the grounds that (1) a subsequent finding of a valid dismissal removes
the basis for the reinstatement aspect of a labor arbiter's decision and, (2) the impossibility to
comply with the reinstatement order due to corporate rehabilitation justifies PAL's failure to exercise
the options under Article 223 of the Labor Code. When the case reached this Court, we partially
granted the petition in a Decision dated August 29, 2007 and effectively reinstated the NLRC
Resolutions insofar as it suspended the proceedings. But as PAL later manifested that the
rehabilitation proceedings have already been terminated, the court proceeded to determine the
remaining issue, which is, as earlier stated, whether petitioners therein may collect their wages
during the period between the Labor Arbiter's order of reinstatement pending appeal and the NLRC
Resolution overturning that of the Labor Arbiter.cralaw

In resolving the case, the Court examined its conflicting rulings with respect to the application of
paragraph 3 of Article 223 of the Labor Code, viz:

At the core of the seeming divergence is the application of paragraph 3 of Article 223 of the Labor
Code which reads:

Labor II – 1
`In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, pending appeal.  The employee shall either be admitted back to work under the same
terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer,
merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution
for reinstatement provided herein.' cralaw

The view as maintained in a number of cases is that:

`x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is

obligatory on the part of the employer to reinstate and pay the wages of the dismissed
employee during the period of appeal until reversal by the higher court.  On the other hand,
if the employee has been reinstated during the appeal period and such reinstatement order is
reversed with finality, the employee is not  required to reimburse whatever salary he received for he
is entitled to such, more so if he actually rendered services during the period.cralaw

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is
entitled to receive wages pending appeal upon reinstatement, which is immediately executory. 
Unless there is a restraining order, it is ministerial upon the Labor Arbiter to implement the order of
reinstatement and it is mandatory on the employer to comply therewith.

The opposite view is articulated in Genuino which states:

`If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for
dismissal is valid, then the employer has the right to require the dismissed employee  on
payroll reinstatement to refund the salaries s/he received while the case was pending appeal,
or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive
from his/her employer under existing laws, collective bargaining agreement provisions, and company
practices. However, if the employee was reinstated to work during the pendency of the appeal, then
the employee is entitled to the compensation received for actual services rendered without need of
refund.cralaw

x x x x'
It has thus been advanced that there is no point in releasing the wages to petitioners since their
dismissal was found to be valid, and to do so would constitute unjust enrichment." (Emphasis, italics
and underscoring in the original; citations omitted.)[32]

The Court then stressed that as opposed to the abovementioned Genuino v. National Labor Relations
Commission,[33] the social justice principles of labor law outweigh or render inapplicable the civil law
doctrine of unjust enrichment. It then went on to examine the precarious implication of the "refund
doctrine" as enunciated in Genuino, thus:

[T]he "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could
harm, more than help, a dismissed employee.  The employee, to make both ends meet, would
necessarily have to use up the salaries received during the pendency of the appeal, only to end up
having to refund the sum in case of a final unfavorable decision.  It is mirage of a stop-gap leading
the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent.  It becomes more logical and practical for the employee to
refuse payroll reinstament and simply find work elsewhere in the interim, if any is available.  Notably,
the option of payroll reinstatement belongs to the employer, even if the employee is able and raring
to return to work.  Prior to Genuino, it is unthinkable for one to refuse payroll reinstatement.  In the
face of the grim possibilities, the rise of concerned employees declining payroll reinstatement is on
the horizon.

Labor II – 1
Further, the Genuino  ruling not only disregards the social justice principles behind the rule, but also
institutes a scheme unduly favorable to management.  Under such scheme, the salaries
dispensed pendente lite merely serve as a bond posted in installment by the employer.  For in the
event of a reversal of the Labor Arbiter's decision ordering reinstatement, the employer gets back the
same amount without having to spend ordinarily for bond premiums.  This circumvents, if not directly
contradicts, the proscription that the "posting of a bond [even a cash bond] by the employer shall not
stay the execution for reinstatement. [Underscoring in the original][34]
cralaw

In view of this, the Court held this stance in Genuino as a stray posture and realigned the proper
course of the prevailing doctrine on reinstatement pending appeal vis-Ã -vis the effect of a reversal
on appeal, that is, even if the order of reinstatement of the Labor Arbiter is reversed on
appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the higher court or
tribunal.  It likewise settled the view that the Labor Arbiter's order of reinstatement is
immediately executory and the employer has to either re-admit them to work under the
same terms and conditions prevailing prior to their dismissal, or to reinstate them in the
payroll, and that failing to exercise the options in the alternative, employer must pay the
employee's salaries.

The discussion, however, did not stop there. The court went on to declare that after the Labor
Arbiter's decision is reversed by a higher tribunal, the employee may be barred from
collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement
pending appeal was without fault on the part of the employer.  It then provided for the two-
fold test in determining whether an employee is barred from recovering his accrued wages, to wit:
(1) there must be actual delay or that the order of reinstatement pending appeal was not executed
prior to its reversal; and (2) the delay must not be due to the employer's unjustified act or
omission.  If the delay is due to the employer's unjustified refusal, the employer may still be required
to pay the salaries notwithstanding the reversal of the Labor Arbiter's Decision.  In Garcia, after it
had been established that there was clearly a delay in the execution of the reinstatement order, the
court proceeded to ascertain whether same was due to PAL's unjustified act or omission. In so doing,
it upheld the CA's finding that the peculiar predicament of a corporate rehabilitation rendered it
impossible for PAL, under the circumstances, to exercise its option under Article 223 of the Labor
Code.  The suspension of claims dictated by rehabilitation procedure therefore constitutes a
justification for PAL's failure to exercise the alternative options of actual reinstatement or payroll
reinstatement.  Because of this, the Court held that PAL's obligation to pay the salaries pending
appeal, as the normal effect of the non-exercise of the options, did not attach.  Simply put,
petitioners cannot anymore collect their accrued salaries during the period between the Labor
Arbiter's order of reinstatement pending appeal and the NLRC Resolution overturning that of the
Labor Arbiter because PAL's failure to actually reinstate them or effect payroll reinstatement was
justified by the latter's situation of being under corporate rehabilitation. cralaw

Application of the Two-Fold Test to the present case

As previously mentioned, the vital question that needs to be answered in the case at bar is:  Can
respondents collect their accrued salaries for the period between the Labor Arbiter's order of
reinstatement pending appeal and the NLRC Resolution overturning that of the Labor Arbiter?   If in
the affirmative, the assailed CA Decision and Resolution which affirmed the June 3, 2004 Order of
Labor Arbiter Castillon denying the Motion to Quash Writ of Execution and ordering the break-open of
petitioner's premises as well as the issuance of the subject Writ of Execution itself, have to be
upheld.  Otherwise, they need to be set aside as what petitioner would want us to do.

To come up with the answer to said question, we shall apply the two-fold test used in Garcia.

Was there an actual delay or was the order of reinstatement pending appeal executed prior to its
reversal?   As can be recalled, Labor Arbiter Gan issued his Decision ordering respondents'
Labor II – 1
reinstatement on December 21, 2001, copy of which was allegedly received by petitioner on February
21, 2002.[35]  On March 4, 2002, petitioner appealed said decision to the NLRC.  A few days later or
on March 11, 2002, respondents filed an Ex-Parte Motion for Issuance of Writ of Execution relative to
the implementation of the reinstatement aspect of the decision.[36]  On April 22, 2002, a Writ of
Execution was issued by Labor Arbiter Gan.  However, until the issuance of the September 5, 2002
NLRC Resolution overturning Labor Arbiter Gan's Decision, petitioner still failed to reinstate
respondents or effect payroll reinstatement in accordance with Article 223 of the Labor Code.  This
was what actually prompted respondents to file an Ex-Parte Motion to Set Case for Conference with
Motion wherein they also prayed for the issuance of a computation of the award of backwages and
Alias Writ of Execution for its enforcement.  It cannot therefore be denied that there was an actual
delay in the execution of the reinstatement aspect of the Decision of Labor Arbiter Gan prior to the
issuance of the NLRC Resolution overturning the same.

Now, the next question is: Was the delay not due to the employer's unjustified act or
omission?   Unlike in Garcia where PAL, as the employer, was then under corporate
rehabilitation, Islriz Trading here did not undergo rehabilitation or was under any analogous situation
which would justify petitioner's non-exercise of the options provided under Article 223 of the Labor
Code.  Notably, what petitioner gave as reason in not immediately effecting reinstatement after he
was served with the Writ of Execution dated April 22, 2002 was that he would first refer the matter
to his counsel as he could not effectively act on the order of execution without the latter's advice.[37] 
He gave his word that upon conferment with his lawyer, he will inform the Office of the Labor Arbiter
of his action on the writ.  Petitioner, however, without any satisfactory reason, failed to fulfill this
promise and respondents remained to be not reinstated until the NLRC resolved petitioner's appeal. 
Evidently, the delay in the execution of respondents' reinstatement was due to petitioner's
unjustified refusal to effect the same.

Hence, the conclusion is that respondents have the right to collect their accrued salaries
during the period between the Labor Arbiter's Decision ordering their reinstatement
pending appeal and the NLRC Resolution overturning the same because petitioner's failure
to reinstate them either actually or through payroll was due to petitioner's unjustified
refusal to effect reinstatement.  In order to enforce this, Labor Arbiter Castillon thus correctly
issued the Writ of Execution dated March 9, 2004 as well as the Order dated June 3, 2004 denying
petitioner's Motion to Quash Writ of Execution and granting respondents' Urgent Motion for Issuance
of Break-Open Order. Consequently, we find no error on the part of the CA in upholding these
issuances and in dismissing the petition for certiorari before it.

Having settled this, we find it unnecessary to discuss further the issues raised by petitioner except
the one with respect to the computation of respondents' accrued salaries.

Correctness of the Computation of

Respondents' Accrued Salaries

Petitioner contends that respondents' accrued salaries in the total amount of P1,110,665.60 have no
factual and legal bases.  This is because of his obstinate belief that the NLRC's reversal of Labor
Arbiter Gan's Decision has effectively removed the basis for such award.

Although we do not agree with petitioner's line of reasoning, we, however, find incorrect the
computation made by Fiscal Examiner Trinchera.

In Kimberly Clark (Phils.), Inc., v. Facundo, [38]  we held that:

[T]he Labor Arbiter's order of reinstatement was immediately executory. After receipt of the Labor
Arbiter's decision ordering private respondents' reinstatement, petitioner has to either re-admit them
to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them
in the payroll.  Failing to exercise the options in the alternative, petitioner must pay private
Labor II – 1
respondents' salaries which automatically accrued from notice of the Labor Arbiter's order
of reinstatement until its ultimate reversal of the NLRC.

xxxx

x x  x [S]ince private respondent's reinstatement pending appeal was effective only until its
reversal by the NLRC on April 28, 1999, they are no longer entitled to salaries from May 1, 1999 to
March 15, 2001, as ordered by the Labor Arbiter. (Emphasis supplied)

To clarify, respondents are entitled to their accrued salaries only from the time petitioner received a
copy of Labor Arbiter Gan's Decision declaring respondents' termination illegal and ordering their
reinstatement up to the date of the NLRC Resolution overturning that of the Labor Arbiter.  This is
because it is only during said period that respondents are deemed to have been illegally dismissed
and are entitled to reinstatement pursuant to Labor Arbiter Gan's Decision which was the one in
effect at that time. Beyond that period, the NLRC Resolution declaring that there was no illegal
dismissal is already the one prevailing.  From such point, respondents' salaries did not accrue not
only because there is no more illegal dismissal to speak of but also because respondents have not yet
been actually reinstated and have not rendered services to petitioner.

Fiscal Examiner Trinchera's computation of respondents' accrued salaries covered the period January
1, 2002 to January 30, 2004.  As there was no showing when petitioner actually received a copy of
Labor Arbiter Gan's decision except for petitioner's self-serving claim that he received the same on
February 21, 2002,[39] we are at a loss as to how Fiscal Examiner Trinchera came up with January 1,
2002 as the reckoning point for computing respondents' accrued wages. We likewise wonder why it
covered the period up to January 30, 2004 when on September 5, 2002, the NLRC already
promulgated its Resolution reversing that of the Labor Arbiter.  Hence, we deem it proper to remand
the records of this case to the Labor Arbiter for the correct computation of respondents' accrued
wages which shall commence from petitioner's date of receipt of the Labor Arbiter's Decision ordering
reinstatement up to the date of the NLRC Resolution reversing the same.  Considering, however, that
petitioner's levied properties have already been awarded to respondents and as alleged by the latter,
have also already been sold to third persons, respondents are ordered to make the proper restitution
to petitioner for whatever excess amount received by them based on the correct computation.

As a final note, since it appears that petitioner still failed to reinstate respondents pursuant to the
final and executory Resolution of the NLRC, respondents' proper recourse now is to move for the
execution of the same.  It is worthy to note that Labor Arbiter Castillon stated in her questioned
Order of June 3, 2004 that the Writ of Execution she issued is for the sole purpose of enforcing the
wages accruing to respondents by reason of Labor Arbiter Gan's order of reinstatement. Indeed, the
last paragraph of said writ provides only for the enforcement of said monetary award and nothing on
reinstatement, viz:

NOW THEREFORE, you are commanded to proceed to the premises of respondents Islriz
Trading/Victor Hugo C. Lu located at Brgy. Luciano Trece Martires[,] Cavite City or wherever it may
be found to collect the amount of One Million One Hundred Eleven Thousand Seven Hundred Sixty
One pesos & 60/100 (P1,111,761.60) inclusive [of] P1,096.00 as execution fees and turn over the
said amount to the NLRC Cashier for further disposition.  In case you fail to collect the said amount in
cash, you are directed to cause the satisfaction of the same out of respondents' chattels,
movable/immovable properties not exempt from execution.  You are directed to return these Writ
One Hundred Eighty (180) days from receipt hereof, together with the report of compliance. cralaw

SO ORDERED.[40]

WHEREFORE, the Petition for Review on Certiorari is DENIED.  The assailed March 18, 2005
Decision and June 16, 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 84744
are AFFIRMED.  The records of this case are ordered REMANDED to the Office of the Labor Arbiter
Labor II – 1
for the correct computation of respondents' accrued salaries covering the date of petitioner's receipt
of the December 21, 2001 Decision of the Labor Arbiter up to the issuance of the NLRC Resolution on
September 5, 2002.  Respondents are ordered to make the  proper  restitution  to  petitioner for 
whatever  excess  amount which  may  be

determined to have been received by them based on the correct computation. cralaw

Labor II – 1
 86.) [G.R. NO. 177026 : January 30, 2009]

LUNESA O. LANSANGAN AND ROCITA CENDAÑA, Petitioners, v. AMKOR TECHNOLOGY

PHILIPPINES, INC., Respondent.

DECISION

CARPIO MORALES, J.:

An anonymous e-mail was sent to the General Manager of Amkor Technology Philippines
(respondent) detailing allegations of malfeasance on the part of its supervisory employees Lunesa
Lansangan and Rosita Cendaña (petitioners) for "stealing company time."1 Respondent thus
investigated the matter, requiring petitioners to submit their written explanation. In handwritten
letters, petitioners admitted their wrongdoing.2 Respondent thereupon terminated petitioners for
"extremely serious offenses" as defined in its Code of Discipline,3 prompting petitioners to file a
complaint for illegal dismissal against it.4

Labor Arbiter Arthur L. Amansec, by Decision of October 20, 2004,5 dismissed petitioners' complaint,
he having found them guilty of

"[s]wiping another employees' [sic] I.D. card or requesting another employee to swipe one's I.D.
card to gain personal advantage and/or in the interest of cheating", an offense of dishonesty
punishable as a serious form of misconduct and fraud or breach of trust under Article 282 of the
Labor Code:

xxx

which allows the dismissal of an employee for a valid cause. (Emphasis and underscoring supplied) cralawlibrary

The Arbiter, however, ordered the reinstatement of petitioners to their former positions
without backwages "as a measure of equitable and compassionate relief" owing mainly to
petitioners' prior unblemished employment records, show of remorse, harshness of the penalty and
defective attendance monitoring system of respondent.6

Respondent assailed the reinstatement aspect of the Arbiter's order before the National Labor
Relations Commission (NLRC).

In the meantime, petitioners, without appealing the Arbiter's finding them guilty of "dishonesty as a
form of serious misconduct and fraud or breach of trust,"moved for the issuance of a "writ of
reinstatement."7

After a series of oppositions, motions and orders,8 the Arbiter issued an alias writ of execution
following which respondent's bank account at Equitable-PCI Bank was garnished. Respondent
thereupon moved for the quashal of the alias writ of execution and lifting of the notice of
garnishment, which the Arbiter denied by Order of January 26, 2005, drawing respondent to appeal
to the NLRC.

After consolidating respondent's appeal from the Labor Arbiter's order of reinstatement and
subsequent appeal/order denying the quashal of the alias writ of execution and lifting of the notice of
garnishment, the NLRC, by Resolution of June 30, 2005,9 granted respondent's appeals by deleting
the reinstatement aspect of the Arbiter's decision and setting aside the Arbiter's Alias Writ of
Execution and Notice of Garnishment. Thus the NLRC disposed as follows:

Labor II – 1
ACCORDINGLY, the appeal is hereby GRANTED. The Labor Arbiter's Decision dated October 20, 2004
is hereby MODIFIED by DELETING the portion that ruled for appelle[e]s'
reinstatement. Consequently, the Writ of Execution dated November 19, 2004, the subsequent Alias
Writ of Execution dated January 26, 2005, and the Notice of Garnishment dated January 14, 2005
served upon Equitable PCI Bank by Sheriff Agripina Sangel are hereby ordered to be SET ASIDE.

SO ORDERED. (Underscoring supplied) cralawlibrary

Petitioners' motion for reconsideration of the NLRC Resolution having been denied, they filed a
petition for certiorari before the Court of Appeals which, by Decision10 of September 19, 2006, while
affirming the finding that petitioners were guilty of misconduct and the like, ordered respondent to
"pay petitioners their corresponding backwages without qualification and deduction for the period
covering October 20, 2004 (date of the Arbiter's decision) up to June 30, 2005 (date of the NLRC
Decision)," citing Article 223 of the Labor Code and Roquero v. Philippine Airlines.11

Both parties' filed their respective motions for partial reconsideration which were denied.12 Only
petitioners have come to this Court via the present Petition for Review, 13 contending that:

WITH ALL DUE RESPECT, THE ORDER OF THE HONORABLE COURT OF APPEALS LIMITING THE
PAYMENT OF BACKWAGES [TO] THE PETITIONERS FROM OCTOBER 20, 2004 (ARBITER DECISION)
UP TO JUNE 30, 2005 (NLRC DECISION) ONLY IS CONTRARY TO THE CASE OF ALEJANDRO
ROQUERO v. PHILIPPINE AIRLINES, INC.[,] G.R. NO. 152329, APRIL [22,] 2003 [AND]

II

. . . THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION

IN CONCLUDING THAT THE PETITIONERS COMMITTED SERIOUS MISCONDUCT, FRAUD,
DISHONESTY AND BREACH OF TRUST. BUT EVEN ASSUMING THAT THE PETITIONERS COMMITTED
THE SWIPING IN OF IDENTIFICATION CARD, THE PENALTY OF DISMISSAL IS TOO SEVERE, HARSH
AND CONTRARY TO ARTICLE 282 OF THE LABOR CODE OF THE PHILIPPINES AND EXISTING
JURISPRUDENCE.14

Since respondent did not appeal from the appellate court's decision, the said court's order for it to
pay backwages to petitioners for the therein specified period has become final.

Petitioners highlight the Court's ruling in Roquero v. Philippine Airlines15 where the therein employer
was ordered to pay the wages to which the therein employee was entitled from the time the
reinstatement order was issued until the finality of this Court's decision16 in favor of the therein
employee. Thus, petitioners contend that the payment of backwages should not be computed only up
to the promulgation by the NLRC of its decision.

In its Comment,17 respondent asserts that, inter alia, petitioners' reliance on Roquero is misplaced in
view of the glaring factual differences between said case and the present case.

The petition fails.

The decision of the Arbiter finding that petitioners committed "dishonesty as a form of serious
misconduct and fraud, or breach of trust" had become final, petitioners not having appealed the
same before the NLRC as in fact they even moved for the execution of the reinstatement aspect of
the decision. It bears recalling that it was only respondent which assailed the Arbiter's decision to the
NLRC - to solely question the propriety of the order for reinstatement, and it succeeded. ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

Labor II – 1
Roquero, as well as Article 22318 of the Labor Code on which the appellate court also relied, finds no
application in the present case. Article 223 concerns itself with an interim relief, granted to a
dismissed or separated employee while the case for illegal dismissal is pending appeal, as what
happened in Roquero. It does not apply where there is no finding of illegal dismissal, as in the
present case.

The Arbiter found petitioners' dismissal to be valid. Such finding had, as stated earlier, become final,
petitioners not having appealed it. Following Article 279 which provides:

xxx

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
(Emphasis, underscoring and italics supplied),

petitioners are not entitled to full backwages as their dismissal was not found to be illegal.
Agabon v. NLRC19 so states '' payment of backwages and other benefits is justified only if the
employee was unjustly dismissed.

WHEREFORE, the petition is DENIED.

Labor II – 1
 87.) [G.R. NO. 172199 : February 27, 2009]

ELIZABETH D. PALTENG, Petitioner, v. UNITED COCONUT PLANTERS BANK, Respondent.

DECISION

QUISUMBING, J.:

Assailed in this Petition for Review on Certiorari are the Decision1 dated December 23, 2005 and
Resolution2 dated April 4, 2006 of the Court of Appeals in CA-G.R. SP No. 72660 denying
reconsideration. The appellate court had modified the Decision3 dated March 6, 2002 of the National
Labor Relations Commission (NLRC) and limited the award of backwages in favor of petitioner
Elizabeth D. Palteng from the time she was illegally dismissed on October 25, 1996, until the
promulgation of the Labor Arbiter's Decision4 on December 6, 1999.

The antecedent facts are as follows:

Petitioner Elizabeth D. Palteng was the Senior Assistant Manager/Branch Operations Officer of
respondent United Coconut Planters Bank in its Banaue Branch in Quezon City.

On April 15, 1996, Area Head and Vice-President Eulallo S. Rodriguez reported to the bank's Internal
Audit and Credit Review Division that bank client Clariza L. Mercado-The Red Shop has incurred Past
Due Domestic Bills Purchased (BP) of P34,260,000. After conducting a diligence audit, the division
reported to the Audit and Examination Committee that Palteng committed several offenses under the
Employee Discipline Code in connection with Mercado's Past Due Domestic BP. It also recommended
that the matter be referred to the Committee on Employee Discipline for proper disposition.

On August 14, 1996, Palteng was required to explain why no disciplinary action should be taken
against her in connection with the following alleged offenses:

"1. Gross negligence and dereliction of duties in the implementation of company policies or valid
orders from Management authorities, when:

A. You granted BP against personal checks. Per bank policy, checks eligible for BP accommodation
are trade checks and granting of BP against personal checks is strictly prohibited.

b. You granted accommodations based on client's statement that a loan will be released. You failed to
confirm this with AO Pearl Urbano before effecting the accommodations. You likewise failed to report
to AO Urbano the excess availments on the OL of the client. Per bank policy on CSBD/CCD clients
with established lines, the servicing unit/branches shall coordinate all BP/DAUD availments with the
account officer for proper monitoring and control.

2. Abuse of discretion when:

A. You granted BP accommodations to the client in excess of the P5 million sublimit under her
Omnibus Line. In spite of the fact that you did not have the approving authority, you did not elevate
the client's availment to the proper authority for approval.

b. You approved the MCs issued to the client beyond your approving limit of P5 million being a Class
C signatory. Issuance[s] were not confirmed by proper approving body."5

Labor II – 1
In response, Palteng explained that at the time the BP accommodation was extended, Mercado has,
as far as she knew, an Omnibus Line of P100 Million secured by a pledge on jewelries. She was not
aware that the Omnibus Line has been reduced to P50 Million and that it contained a P5 Million
sublimit on BP. Nevertheless, she accepted full responsibility for granting the BP accommodation
against Mercado's personal checks beyond and outside her authority. While she admitted committing
a major offense that may cause her dismissal, she claimed that it was an honest mistake.6

After hearing and investigation, the committee recommended Palteng's dismissal. On October 25,
1996, Palteng was dismissed with forfeiture of all benefits.7

Palteng filed a complaint8 for illegal dismissal seeking reinstatement to her former position without
loss of seniority rights with full backwages, or in the alternative, payment of separation pay with full
backwages, and recovery of her monetary claims with damages.

On December 6, 1999, the Labor Arbiter rendered a decision disposing, thus:

WHEREFORE, premises considered, judgment is hereby rendered declaring as illegal the termination
of herein complainant and ordering respondent to pay complainant the following:

1.) Separation pay in lieu of reinstatement computed at the rate of one (1) month pay for every year
of service from the time of her employment up to the time of termination.

2.) Full backwages plus increments or adjustment if any from the time of her dismissal until finality
of judgment.

3.) P500,000.00 as moral damages.

4.) [P300,000.00] as exemplary damages.

5.) 10% of the total monetary award as attorney's fees.

SO ORDERED.9

The bank appealed to the NLRC which rendered a decision on March 6, 2002, to wit:

WHEREFORE, premises considered[,] the assailed decision is hereby affirmed except that the awards
of moral and exemplary damages are ordered deleted therefrom.

SO ORDERED.10

Dissatisfied, the bank elevated the matter to the Court of Appeals. On December 23, 2005, the
appellate court modified the decision of the NLRC, in this wise:

WHEREFORE, premises considered, the petition is partially GRANTED. The decision of the labor
arbiter dated December 6, 1999, as affirmed with modification by the National Labor Relations
Commission, is further MODIFIED in that the award of backwages in favor of respondent Elizabeth
D. Palteng shall correspond to the period from the date of her dismissal (on October 25, 1996) up to
the promulgation of the labor arbiter's decision (on December 6, 1999).

SO ORDERED.11

The appellate court noted Palteng's admission that she granted BP accommodation to Mercado
against her personal checks beyond and outside her authority and that said infraction is a major

Labor II – 1
offense that may cause her dismissal. Hence, it limited the award of backwages from the time
Palteng was illegally dismissed on October 25, 1996, until the promulgation of the Labor Arbiter's
Decision on December 6, 1999, as penalty for her offense.

Petitioner now submits the following issue for our consideration:

THE COURT OF APPEALS ERRED IN LIMITING THE AWARD OF BACKWAGES IN FAVOR OF

PETITIONER, WHOSE DISMISSAL FROM EMPLOYMENT WAS DECLARED ILLEGAL BY THE COURT AND
THE LABOR TRIBUNALS, TO ONLY UP TO THE DATE OF THE PROMULGATION OF THE LABOR
ARBITER'S DECISION[.]12

The crux of the present controversy is whether the award of backwages, if any, should be
counted from the time petitioner was illegally dismissed until the promulgation of the
Labor Arbiter's Decision on December 6, 1999, or until the finality of the decision.

Petitioner contends that the Labor Arbiter, the NLRC and the Court of Appeals unanimously
found her dismissal illegal. Thus, she is entitled to the twin reliefs of reinstatement (or
payment of separation pay if reinstatement is no longer possible) and payment of
backwages. She adds that the backwages should be computed from the time she was
illegally dismissed on October 25, 1996, until the finality of the decision.

Respondent counters that petitioner is not entitled to the payment of backwages since she is not
entirely faultless or fully innocent of the offenses imputed against her.

Settled is the rule that an employee who is illegally dismissed from work is entitled to reinstatement
without loss of seniority rights, and other privileges as well as to full backwages, inclusive of
allowances, and to other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.13 However, in the
event that reinstatement is no longer possible, the employee may be given separation pay
instead.14 Ï‚ηαñrοblεš νιr†υαl lαω lιbrαrÿ

Notably, reinstatement and payment of backwages are distinct and separate reliefs given to alleviate
the economic setback brought about by the employee's dismissal. The award of one does not bar the
other. Backwages may be awarded without reinstatement, and reinstatement may be ordered
without awarding backwages.15

In a number of cases,16 the Court, despite ordering reinstatement or payment of separation pay in

lieu of reinstatement, has not awarded backwages as penalty for the misconduct or infraction
committed by the employee.

In the case at bar, petitioner admitted that she granted the BP accommodation against Mercado's
personal checks beyond and outside her authority. The Labor Arbiter, the NLRC and the Court of
Appeals all found her to have committed an "error of judgment,"17 "honest mistake,"18 "honest
mistake" vis - Ã -vis a "major offense."19

Since petitioner was not faultless in regard to the offenses imputed against her, we hold
that the award of separation pay only, without backwages, is proper.

WHEREFORE, the Decision dated December 23, 2005 of the Court of Appeals in CA-G.R. SP No.
72660 is AFFIRMED with the MODIFICATION that the award of backwages is DELETED. Petitioner
Elizabeth D. Palteng is hereby DECLARED entitled to be paid by respondent Bank only separation
pay in lieu of reinstatement computed at the rate of one (1) month pay for every year of service from
the time of her employment up to the time of her dismissal. No pronouncement as to costs.

Labor II – 1
Labor II – 1
 88.) [G.R. No. 155109 : September 29, 2010]

C. ALCANTARA & SONS, INC., PETITIONER, VS. COURT OF APPEALS, LABOR ARBITER
ANTONIO M. VILLANUEVA, LABOR ARBITER ARTURO L. GAMOLO, SHERIFF OF NLRC RAB-
XI-DAVAO CITY, NAGKAHIUSANG MAMUMUO SA ALSONS-SPFL (NAMAAL-SPFL),
FELIXBERTO IRAG, JOSHUA BARREDO, ERNESTO CUARIO, EDGAR MONDAY, EDILBERTO
DEMETRIA, HERMINIO ROBILLO, ROMULO LUNGAY, MATROIL DELOS SANTOS, BONERME
MATURAN, RAUL CANTIGA, EDUARDO CAMPUSO, RUDY ANADON, GILBERTO GABRONINO,
BONIFACIO SALVADOR, CIRILO MINO, ROBERTO ABONADO, WARLITO MONTE, PEDRO
ESQUIERDO, ALFREDO TROPICO, DANILO MEJOS, HECTOR ESTUITA, BARTOLOME
CASTILLANES, EDUARDO CAPUYAN, SATURNINO CAGAS, ALEJANDRO HARDER, EDUARDO
LARENA, JAIME MONTEDERAMOS, ERMELANDO BASADRE, REYNALDO LIMPAJAN, ELPIDIO
LIBRANZA, TEDDY SUELO, JOSE AMOYLIN, TRANQUILINO ORALLO, CARLOS BALDOS,
MANOLITO SABELLANO, CARMELITO TOBIAS, PRIMITIVO GARCIA, JUANITO ALDEPOLLA,
LUDIVICO ABAD, WENCISLAO INGHUG, RICARDO ALTO, EPIFANIO JARABAY, FELICIANO
AMPER, ALEXANDER JUDILLA, ROBERTO ANDRADE, ALFREDO LESULA, JULIO ANINO,
BENITO MAGPUSAO, PEDRO AQUINO, EDDIE MANSANADES, ROMEO ARANETA, ARGUILLAO
MANTICA, CONSTANCIO ARNAIZ, ERNESTO HOTOY, JUSTINO ASCANO, RICARDO
MATURAN, EDILBERTO YAMBAO, ANTONIO MELARGO, JESUS BERITAN, ARSENIO MELICOR,
DIOSDADO BONGABONG, LAURO MONTENEGRO, CARLITO BURILLO, LEO MORA, PABLO
BUTIL, ARMANDO GUCILA, JEREMIAH CAGARA, MARIO NAMOC, CARLITO CAL, GERWINO
NATIVIDAD, ROLANDO CAPUYAN, EDGARDO ORDIZ, LEONARDO CASURRA, PATROCINIO
ORTEGA, FILEMON CESAR, MARIO PATAN, ROMEO COMPRADO, JESUS PATOC, RAMON
CONSTANTINO, ALBERTO PIELAGO, SAMUEL DELA LLANA, NICASIO PLAZA, ROSALDO
DAGONDON, TITO GUADES, BONIFACIO DINAGUDOS, PROCOPIO RAMOS, JOSE EBORAN,
ROSENDO SAJOL, FRANCISCO EMPUERTO, PATRICIO SALOMON, NESTOR ENDAYA, MARIO
SALVALEON, ERNESTO ESTILO, BONIFACIO SIGUE, VICENTE FABROA, JAIME SUCUAHI,
CELSO HUISO, ALEX TAUTO-AN, SATURNINO YAGON, CLAUDIO TIROL, SULPECIO GAGNI,
JOSE TOLERO, FERVIE GALVEZ, ALFREDO TORALBA AND EDUARDO GENELSA,
RESPONDENTS.

[G.R. NO. 155135]

NAGKAHIUSANG MAMUMUO SA ALSONS-SPFL (NAMAAL-SPFL), FELIXBERTO IRAG, JOSHUA

BARREDO, ERNESTO CUARIO, EDGAR MONDAY, EDILBERTO DEMETRIA, HERMINIO
ROBILLO, ROMULO LUNGAY, MATROIL DELOS SANTOS, BONERME MATURAN, RAUL
CANTIGA, EDUARDO CAMPUSO, RUDY ANADON, GILBERTO GABRONINO, BONIFACIO
SALVADOR, CIRILO MINO, ROBERTO ABONADO, WARLITO MONTE, PEDRO ESQUIERDO,
ALFREDO TROPICO, DANILO MEJOS, HECTOR ESTUITA, BARTOLOME CASTILLANES,
EDUARDO CAPUYAN, SATURNINO CAGAS, ALEJANDRO HARDER, EDUARDO LARENA, JAIME
MONTEDERAMOS, ERMELANDO BASADRE, REYNALDO LIMPAJAN, ELPIDIO LIBRANZA,
TEDDY SUELO, JOSE AMOYLIN, TRANQUILINO ORALLO, CARLOS BALDOS, MANOLITO
SABELLANO, CARMELITO TOBIAS, PRIMITIVO GARCIA, JUANITO ALDEPOLLA, LUDIVICO
ABAD, WENCISLAO INGHUG, RICARDO ALTO, EPIFANIO JARABAY, FELICIANO AMPER,
ALEXANDER JUDILLA, ROBERTO ANDRADE, ALFREDO LESULA, JULIO ANINO, BENITO
MAGPUSAO, PEDRO AQUINO, EDDIE MANSANADES, ROMEO ARANETA, ARGUILLAO
MANTICA, CONSTANCIO ARNAIZ, ERNESTO HOTOY, JUSTINO ASCANO, RICARDO
MATURAN, EDILBERTO YAMBAO, ANTONIO MELARGO, JESUS BERITAN, ARSENIO MELICOR,
DIOSDADO BONGABONG, LAURO MONTENEGRO, CARLITO BURILLO, LEO MORA, PABLO
BUTIL, ARMANDO GUCILA, JEREMIAH CAGARA, MARIO NAMOC, CARLITO CAL, GERWINO
NATIVIDAD, ROLANDO CAPUYAN, JUANITO NISNISAN, AURELIO CARIN, PRIMO OPLIMO,
ANGELITO CASTANEDA, EDGARDO ORDIZ, LEONARDO CASURRA, PATROCINIO ORTEGA,
FILEMON CESAR, MARIO PATAN, ROMEO COMPRADO, JESUS PATOC, RAMON
CONSTANTINO, MANUEL PIAPE, ROY CONSTANTINO, ALBERTO PIELAGO, SAMUEL DELA
LLANA, NICASIO PLAZA, ROSALDO DAGONDON, TITO GUADES, BONIFACIO DINAGUDOS,
Labor II – 1
 PROCOPIO RAMOS, JOSE EBORAN, ROSENDO SAJOL, FRANCISCO EMPUERTO, PATRICIO
SALOMON, NESTOR ENDAYA, MARIO SALVALEON, ERNESTO ESTILO, BONIFACIO SIGUE,
VICENTE FABROA, JAIME SUCUAHI, CELSO HUISO, ALEX TAUTO-AN, SATURNINO YAGON,
CLAUDIO TIROL, SULPECIO GAGNI, JOSE TOLERO, FERVIE GALVEZ, ALFREDO TORALBA
AND EDUARDO GENELSA, PETITIONERS, VS. C. ALCANTARA & SONS, INC., EDITHA I.
ALCANTARA, ATTY. NELIA A. CLAUDIO, CORNELIO E. CAGUIAT, JESUS S. DELA CRUZ,
ROLANDO Z. ANDRES AND JOSE MA. MANUEL YRASUEGUI, RESPONDENTS.

[G.R. NO. 179220]

NAGKAHIUSANG MAMUMUO SA ALSONS-SPFL (NAMAAL-SPFL), AND ITS MEMBERS WHOSE

NAMES ARE LISTED BELOW, PETITIONERS, VS. PROMULGATED: C. ALCANTARA & SONS,
INC., RESPONDENT.

DECISION

ABAD, J.:

This case is about a) the consequences of an illegally staged strike upon the employment status of
the union officers and its ordinary members and b) the right of reinstated union members to go back
to work pending the company's appeal from the order reinstating them.

The Facts and the Case

C. Alcantara & Sons, Inc., (the Company) is a domestic corporation engaged in the manufacture and
processing of plywood.  Nagkahiusang Mamumuo sa Alsons-SPFL (the Union) is the exclusive
bargaining agent of the Company's rank and file employees.  The other parties to these cases are the
Union officers[1] and their striking members.[2]

The Company and the Union entered into a Collective Bargaining Agreement (CBA) that bound them
to hold no strike and no lockout in the course of its life.  At some point the parties began negotiating
the economic provisions of their CBA but this ended in a deadlock, prompting the Union to file a
notice of strike.  After efforts at conciliation by the Department of Labor and Employment (DOLE)
failed, the Union conducted a strike vote that resulted in an overwhelming majority of its members
favoring it.  The Union reported the strike vote to the DOLE and, after the observance of the
mandatory cooling-off period, went on strike.

During the strike, the Company filed a petition for the issuance of a writ of preliminary injunction
with prayer for the issuance of a temporary restraining order (TRO) Ex Parte[3] with the National
Labor Relations Commission (NLRC) to enjoin the strikers from intimidating, threatening, molesting,
and impeding by barricade the entry of non-striking employees at the Company's premises.  The
NLRC first issued a 20-day TRO and, after hearing, a writ of preliminary injunction, enjoining the
Union and its officers and members from performing the acts complained of.  But several attempts to
implement the writ failed.  Only the intervention of law enforcement units made such implementation
possible.  Meantime, the Union filed a petition[4] with the Court of Appeals (CA), questioning the
preliminary injunction order.  On February 8, 1999 the latter court dismissed the petition.  The Union
did not appeal from such dismissal.

The Company, on the other hand, filed a petition with the Regional Arbitration Board to declare the
Union's strike illegal,[5] citing its violation of the no strike, no lockout, provision of their CBA. 
Subsequently, the Company amended its petition to implead the named Union members who
allegedly committed prohibited acts during the strike.  For their part, the Union, its officers, and its
affected members filed against the Company a counterclaim for unfair labor practices, illegal
dismissal, and damages. The Union also assailed as invalid the service of summons on the individual
Union members included in the amended petition.
Labor II – 1
On June 29, 1999 the Labor Arbiter rendered a decision,[6] declaring the Union's strike illegal for
violating the CBA's no strike, no lockout, provision.  As a consequence, the Labor Arbiter held that
the Union officers should be deemed to have forfeited their employment with the Company and that
they should pay actual damages of P3,825,000.00 plus 10% interest and attorney's fees.  With
respect to the striking Union members, finding no proof that they actually committed illegal acts
during the strike, the Labor Arbiter ordered their reinstatement without backwages.  The Labor
Arbiter denied the Union's counterclaim for lack of merit.

On June 29, 1999 the terminated Union members promptly filed a motion for their immediate
reinstatement but the Labor Arbiter did not act on the same.  At any rate, the Company did not
reinstate them.  Both parties appealed[7] the Labor Arbiter's decision to the NLRC. The Company
impugned the Labor Arbiter's decision insofar as it ordered the reinstatement of the terminated Union
members.  The Union, on the other hand, questioned the declaration of illegality of the strike as well
as the dismissal of its officers and the order for them to pay damages.

On November 8, 1999 the NLRC rendered a decision,[8] affirming that of the Labor Arbiter insofar as
the latter declared the strike illegal, ordered the Union officers terminated, and directed them to pay
damages to the Company.  The NLRC ruled, however, that the Union members involved, who were
identified in the proceedings held in the case, should also be terminated for having committed
prohibited and illegal acts.

The Union filed a petition for certiorari[9] with the CA, questioning the NLRC decision. Finding merit in
the petition, the CA rendered a decision on March 20, 2002,[10] annulling the NLRC decision and
reinstating that of the Labor Arbiter.  The Company and the Union with its officers and members filed
separate petitions for review of the CA decision in G.R. 155109 and 155135, respectively.

During the pendency of these cases, the affected Union members filed with the Labor Arbiter a
motion for reinstatement pending appeal by the parties and the computation of their backwages
based on the CA decision.  After hearing, the Labor Arbiter issued a resolution dated November 21,
2002,[11] holding that due to the delay in the resolution of the dispute and the impracticability of
reinstatement owing to the fact that the relations between the terminated Union members and the
Company had been severely strained by the prolonged litigation, payment of separation pay to such
Union members was in order.  The Labor Arbiter thus approved the computation and payment of
their separation pay and denied all their other claims.

Both parties appealed the Labor Arbiter's resolution[12] to the NLRC.  Initially, in its resolution dated
April 30, 2003,[13] the NLRC declared the Labor Arbiter's resolution of November 21, 2002 void for
lack of factual and legal basis but ordered the Company to pay the affected employees' accrued
wages and 13th month pay considering the Company's refusal to reinstate them pending appeal.  On
motion for reconsideration by both parties, however, the NLRC issued a resolution on August 29,
2003,[14] modifying its earlier resolution by deleting the grant of accrued wages and 13th month pay
to the subject employees, thus denying their motion for computation.

Upon the Union's petition for certiorari[15] with the CA, questioning the NLRC's denial of the
terminated Union members' claim for separation pay, accrued wages, and other benefits, the CA
rendered a decision on February 24, 2005,[16] dismissing the petition.  The CA ruled that the
reinstatement pending appeal provided under Article 223 of the Labor Code contemplated illegal
dismissal or termination cases and not cases under Article 263.  Thus, the CA ruled that the
resolution ordering the reinstatement of the terminated Union members and the payment of their
wages and other benefits had no basis.  Aggrieved, the Union sought intervention by this Court.

The Issues Presented

The issues presented in these cases are:

Labor II – 1
1. Whether or not the NLRC properly acquired jurisdiction over the persons of the individual Union
members impleaded in the case;

2. Whether or not the Union staged an illegal strike;

3. Assuming the strike to be illegal, whether or not the impleaded Union members committed illegal
acts during the strike, justifying their termination from employment;

4. Whether or not the terminated Union members are entitled to the payment of backwages on
account of the Company's refusal to reinstate them, pending appeal by the parties, from the Labor
Arbiter's decision of June 29, 1999; and

5. Whether or not the terminated Union members are entitled to accrued backwages and separation
pay.

The Rulings of the Court

One.  The NLRC acquires jurisdiction over parties in cases before it either by summons served on
them or by their voluntary appearance before its Labor Arbiter. Here, while the Union insists that
summons were not properly served on the impleaded Union members with respect to the Company's
amended petition that sought to declare the strike illegal, the records show that they were so
served.  The Return of Service of Summons[17] indicated that 74 out of the 81[18] impleaded Union
members were served with summons.  But they refused either to accept the summons or to
acknowledge receipt of the same. Such refusal cannot of course frustrate the NLRC's acquisition of
jurisdiction over them.  Besides, the affected Union members voluntarily entered their appearance in
the case when they sought affirmative relief in the course of the proceedings like an award of
damages in their favor.

Two.  A strike may be regarded as invalid although the labor union has complied with the strict
requirements for staging one as provided in Article 263 of the Labor Code when the same is held
contrary to an existing agreement, such as a no strike clause or conclusive arbitration clause.[19] 
Here, the CBA between the parties contained a "no strike, no lockout" provision that enjoined both
the Union and the Company from resorting to the use of economic weapons available to them under
the law and to instead take recourse to voluntary arbitration in settling their disputes.

No law or public policy prohibits the Union and the Company from mutually waiving the strike and
lockout maces available to them to give way to voluntary arbitration. Indeed, no less than the 1987
Constitution recognizes in Section 3, Article XIII, preferential use of voluntary means to settle
disputes.  Thus -

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

The Court finds no compelling reason to depart from the findings of the Labor Arbiter, the NLRC, and
the CA regarding the illegality of the strike.  Social justice is not one-sided.  It cannot be used as a
badge for not complying with a lawful agreement.

Three.  Since the Union's strike has been declared illegal, the Union officers can, in accordance with
law be terminated from employment for their actions.  This includes the shop stewards.  They cannot
be shielded from the coverage of Article 264 of the Labor Code since the Union appointed them as
such and placed them in positions of leadership and power over the men in their respective work
units.
Labor II – 1
As regards the rank and file Union members, Article 264 of the Labor Code provides that termination
from employment is not warranted by the mere fact that a union member has taken part in an illegal
strike.  It must be shown that such a union member, clearly identified, performed an illegal act or
acts during the strike.[20]

Here, although the Labor Arbiter found no proof that the dismissed rank and file Union members
committed illegal acts, the NLRC found following the injunction hearing in NLRC IC M-000126-98 that
the Union members concerned committed such acts, for which they had in fact been criminally
charged before various courts and the prosecutors' office in Davao City.  Since the CA held that the
existence of criminal complaints against the Union members did not warrant their dismissal, it
becomes necessary for the Court to go into the records to settle the issue.

The striking Union members allegedly committed the following prohibited acts:

a. They threatened, coerced, and intimidated non-striking employees, officers, suppliers

and customers;

b. They obstructed the free ingress to and egress from the company premises; and

c. They resisted and defied the implementation of the writ of preliminary injunction issued
against the strikers.

Cornelio Caguiat, Ruben Tungapalan, and Eufracio Rabusa depicted the above prohibited acts in their
affidavits and testimonies.  The Sheriff of the NLRC said in his Report[21] that, in the course of his
implementation of the writ of injunction, he observed that the striking employees blocked the exit
lane of the Alson drive with their tent.  Tungapalan, a non-striking employee, identified the Union
members who threatened and coerced him.  Indeed, he filed criminal actions against them.  Lastly,
the photos taken of the strike show the strikers, properly identified, committing the acts complained
of.  These constitute substantial evidence in support of the termination of the subject Union
members.

The mere fact that the criminal complaints against the terminated Union members were subsequently
dismissed for one reason or another does not extinguish their liability under the Labor Code.  Nor
does such dismissal bar the admission of the affidavits, documents, and photos presented to
establish their identity and guilt during the hearing of the petition to declare the strike illegal.  The
technical grounds that the Union interposed for denying admission of the photos are also not binding
on the NLRC.[22]

Four.  The terminated Union members contend that, since the Company refused to
reinstate them after the Labor Arbiter rendered a decision in their favor, the Company
should be ordered to pay them their wages during the pendency of the appeals from the
Labor Arbiter's decision.

It will be recalled that after the Labor Arbiter rendered his decision on June 29, 1999, which decision
ordered the reinstatement of the terminated Union members, the latter promptly filed a motion for
their reinstatement pending appeal.  But the Labor Arbiter did not for some reason act on the
motion.  As it happened, after about four months or on November 8, 1999, the NLRC reversed the
Labor Arbiter's reinstatement order.  It cannot be said, therefore, that the Company had resisted a
standing order of reinstatement directed at it at this point.

Of course, on March 20, 2002 the CA restored the Labor Arbiter's reinstatement order.  And this
prompted the affected Union members to again file with the Labor Arbiter a motion for their
reinstatement pending appeal.  But, acting on the motion, the Labor Arbiter resolved at this point
Labor II – 1
that reinstatement was no longer practicable because of the severely strained relation between the
company and the terminated Union members.  In place of reinstatement, the Labor Arbiter ordered
the Company to pay them their separation pays.

Both parties appealed the Labor Arbiter's above ruling[23] to the NLRC.  But, as it turned out the NLRC
did not also favor reinstatement. It instead ordered the Company to pay the terminated Union
members their accrued wages and 13th month pay considering its refusal to reinstate them pending
appeal.  On motion for reconsideration, however, the NLRC reconsidered and deleted altogether the
grant of accrued wages and 13th month pay.  The Union appealed the NLRC ruling to the CA on behalf
of its terminated members but the CA denied their appeal.

The CA denied reinstatement for the reason that the reinstatement pending appeal provided under
Article 223 of the Labor Code contemplated illegal dismissal or termination cases and not cases under
Article 264.  But this perceived distinction does not find support in the provisions of the Labor Code.

The grounds for termination under Article 264 are based on prohibited acts that employees could
commit during a strike.  On the other hand, the grounds for termination under Articles 282 to 284
are based on the employee's conduct in connection with his assigned work. Still, Article 217, which
defines the powers of Labor Arbiters, vests in the latter jurisdiction over all termination cases,
whatever be the grounds given for the termination of employment. Consequently, Article 223, which
provides that the decision of the Labor Arbiter reinstating a dismissed employee shall immediately be
executory pending appeal, cannot but apply to all terminations irrespective of the grounds on which
they are based.

Here, although the Labor Arbiter failed to act on the terminated Union members' motion
for reinstatement pending appeal, the Company had the duty under Article 223 to
immediately reinstate the affected employees even if it intended to appeal from the
decision ordaining such reinstatement.  The Company's failure to do so makes it liable for
accrued backwages until the eventual reversal of the order of reinstatement by the NLRC
on November 8, 1999,[24] a period of four months and nine days.

Five. While it is true that generally the grant of separation pay is not available to employees who are
validly dismissed, there are, in furtherance of the law's policy of compassionate justice, certain
circumstances that warrant the grant of some relief in favor of the terminated Union members based
on equity.

Bitter labor disputes, especially strikes, always generate a throng of odium and abhorrence that
sometimes result in unpleasant, although unwanted, consequences.[25] Considering this, the striking
employees' breach of certain restrictions imposed on their concerted actions at their employer's
doorsteps cannot be regarded as so inherently wicked that the employer can totally disregard their
long years of service prior to such breach.[26]  The records also fail to disclose any past infractions
committed by the dismissed Union members.  Taking these circumstances in consideration, the Court
regards the award of financial assistance to these Union members in the form of one-half month
salary for every year of service to the company up to the date of their termination as equitable and
reasonable.

WHEREFORE, the Court DENIES the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL and its
officers and members in G.R. 155135 for lack of merit, and REVERSES and SETS ASIDE the
decision of the Court of Appeals in CA-G.R. SP 59604 dated March 20, 2002.  The Court, on the other
hand, GRANTS the petition of C. Alcantara & Sons, Inc. in G.R. 155109 and REINSTATES the
decision of the National Labor Relations Commission in NLRC CA M-004996-99 dated November 8,
1999.

Further, the Court PARTIALLY GRANTS the petition of the Nagkahiusang Mamumuo sa Alsons-SPFL

and their dismissed members in G.R. 179220 and ORDERS C. Alcantara & Sons, Inc. to pay the
Labor II – 1
terminated Union members backwages for four (4) months and nine (9) days and separation pays
equivalent to one-half month salary for every year of service to the company up to the date of their
termination, with interest of 12% per annum from the time this decision becomes final and executory
until such backwages and separation pays are paid.  The Court DENIES all other claims.

Labor II – 1
 89.) [G.R. Nos. 170542-43 : December 13, 2010]

ANTONIO A. ABOC, PETITIONER, VS. METROPOLITAN BANK AND TRUST COMPANY,

RESPONDENT.

[G.R. No. 176460]

METROPOLITAN BANK AND TRUST COMPANY, PETITIONER, VS. ANTONIO A. ABOC,

RESPONDENT.

DECISION

MENDOZA, J.:

Assailed in these consolidated petitions for review is the October 28, 2005 Decision[1] of the Court of
Appeals-Cebu City (CA) disposing two consolidated cases, CA-G.R. SP. No. 80747 and CA-G.R. SP.
No. 81363. The CA Decision affirmed the Decision[2] of the National Labor Relations
Commission (NLRC) which reversed the Decision[3] of the Labor Arbiter (LA) finding Antonio A.
Aboc (Aboc) to have been illegally dismissed by the Metropolitan Bank and Trust
Company (Metrobank).

These two cases stemmed from a complaint for illegal dismissal and damages filed by Aboc against
Metrobank on October 1, 1998.

In his position paper,[4] Aboc, the Regional Operations Coordinator of Metrobank in Cebu City with a
monthly salary of  P11,980.00, alleged that on August 29, 1988, he started working as a loans clerk.
He was given merit increases and awarded promotions during his employment because of his highly
satisfactory performance. For nine years, he maintained an unblemished employment record until he
received an inter-office letter[5] on January 29, 1998, requiring him to explain in writing the charges
that he had actively participated in the lending activities of his immediate supervisor, Wynster Y.
Chua (Chua), the Branch Manager of Metrobank where he was assigned.

Aboc wrote a letter[6] to Metrobank explaining that he had no interest whatsoever in the lending
business of Chua because it was solely owned by the latter.  He admitted, however, that he did some
acts for Chua in connection with his lending activity. He did so because he could not say "no" to Chua
because of the latter's influence and ascendancy over him and because of his "utang na loob" (debt
of gratitude).[7]

His participation in the lending activity was limited to ministerial acts such as the preparation of
deposit and withdrawal slips and the typing of statement of accounts for some clients of Chua.  In
fact, Chua wrote a letter to Metrobank absolving him of any responsibility and participation in his
lending activities. Despite the same, Metrobank still dismissed him on February 12, 1998.

Metrobank, on the other hand, replied that sometime in November 1995, Chua, Judith Eva Cabrido
(assistant manager), Arthur Arcepi (accountant), and Aboc organized a credit union known as Cebu
North Road Investment (CNRI). Said officers and employees used Metrobank's premises, equipment
and facilities in their lending business. Apparently, its head office was not informed of the
organization of CNRI. Had it been informed of the organization of said credit union, it would not have
tolerated or approved of it because the nature of its business would be in conflict, inimical, and in
competition with its banking business.  Moreover, they did not register CNRI with the Securities and
Exchange Commission (SEC) and with the Department of Trade and Industry (DTI). The lending and
investment business of CNRI was confined not only to the employees of Metrobank but also to
outsiders, including clients of the bank.[8]
Labor II – 1
Metrobank also disclosed that on August 13, 1996, Aboc and his companions created another credit
union, the First Fund Access (FFA), which opened accounts with Metrobank under fictitious names.
Again, it was not informed of the existence of this credit union.

In September 1997, Chua and Aboc were observed to have openly convinced outsiders and clients of
Metrobank to patronize their lending and investment business. During the investigation conducted by
Metrobank on January 15, 1998, it was discovered that Aboc solicited investors including its clients
for said credit union. He also induced bank clients to withdraw their accounts and invest them in
CNRI.  He even signed as one of the signatories in the trust receipts of some bank clients.

During the administrative investigation, Metrobank likewise discovered that Aboc committed the
following acts:

1. Preparation of all necessary documents on deposits/placements and loans of said

lending activities.

2. Preparation of checks and acting as co-signatory of Chua in payment for matured

deposits/placements or proceeds of loans to the damage and prejudice of Metrobank.

Metrobank required Aboc to submit a written explanation why he should not be dismissed for cause
and attend a conference in the morning of February 10, 1998 at the Visayas Regional Office, Fuente
Osmeña Center, Cebu City, in which he was allowed to bring a counsel of his own choice. On
February 6, 1998, he submitted his written explanation. On February 10, 1998, he attended the
conference.

Thereafter, Metrobank found that Aboc's actions constituted serious misconduct and a breach of trust
and confidence. On February 12, 1998, Metrobank terminated  his services.

Ruling of the Labor Arbiter

After the parties had submitted their respective position papers, the LA rendered her decision on July
12, 1999, finding that Aboc was illegally dismissed from the service by Metrobank. The dispositive
portion of her decision reads:

WHEREFORE, VIEWED FROM THE FOREGOING, judgment is hereby rendered declaring complainant
Antonio Aboc to have been illegally dismissed from the service by respondent Metropolitan Bank and
Trust Company (Metrobank). Consequently, same respondent Metrobank is hereby ordered to
reinstate complainant Aboc to his former position or to a substantially equivalent position without
loss of seniority rights and other privileges, and to pay said complainant the following, to wit:

1. Backwages

February 12, 1998 to July 12, 1999

P11, 980.00 x 18 months ..............................P215, 640.00
13th month = 1 yr ..................P11, 980.00
5 mons ........................P  4, 991.66
                                             P 16, 971.66

Service Incentive Leave (P11, 980.00 divided

by 26 = P460.76 x 5 ..................2,303.80   P19,275.46    P234, 915.46

2. 10% Attorney's Fees............................................P 23, 491.54

GRAND TOTAL AWARD---------------------------------P258, 407.00[9]
Labor II – 1
The LA reasoned out that Metrobank failed to prove by clear and convincing evidence the charges of
serious misconduct, breach of trust and loss of confidence against Aboc. His lending activities were
not foreign to Metrobank in the sense that credit unions commonly existed in its other branches and
that said credit unions were handled by its high ranking employees.

The LA added that Aboc's participation in the lending activities was due to "force of circumstance." He
was an "unwilling participant" in the business of his superior because  he could not just say "no" to
Chua in view of the latter's moral ascendancy over him. In fact, Chua vouched for his non-
participation in the lending business. According to the LA, to sanction the penalty of dismissal against
Aboc would be unfair.[10]

Moreover, the LA ruled that Metrobank did not comply with the due process requirement in
dismissing Aboc because no hearing was conducted after he was required to explain. He was never
informed that he was going to be investigated in connection with the charges being leveled against
him. The conference set up by Metrobank could not be considered a substitute to the actual holding
of a hearing.

Ruling of the National

Labor Relations Commission

On December 11, 2002, the NLRC set aside the decision of the LA but ordered Metrobank to pay
Aboc reinstatement wages from July 12, 1999 to September 16, 1999; salary increase from January
2000 to June 2001; Christmas bonus for the year 2000; 13th month pay differential for the year
2000; and salary differential for July and August 2001. The dispositive portion of the NLRC Decision
reads:

WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby set aside and vacated
and a new one entered dismissing the complaint. However, respondent Metropolitan Bank and Trust
Company is hereby ordered to pay the following amounts with respect to complainant's
reinstatement pending appeal:

1. Reinstatement Wages (July 12, 1999 to

September 16, 1999 at P11, 980.00) P23, 960.00
2. Salary Increase from January 2000 to
June 2001 at P1, 500.00/month 27, 000.00
3. Christmas Bonus CY 2000  18, 030.00
4. 13th Month Pay Differential for CY 2000 1, 500.00
5. Salary Diff'l for July & Aug. 2001  7, 200.00
Total P77, 690.00

SO ORDERED.[11]

The NLRC ruled that Aboc was guilty of serious misconduct and breach of trust and loss of confidence
based on the following overt acts:

1. Complainant (Aboc) was an organizer of both CNRI and FFA, business entities which

directly competed with the line of business of respondent (Metrobank);

2. Complainant was a responsible officer of both credit unions and actively participated in
their transactions, using the respondent bank's office, facilities, and equipments.

3. Complainant, as bank officer, had the serious responsibility of reporting to respondent

the establishment of CNRI and FFA but he deliberately failed to do so.

Labor II – 1
 4. Petitioner admits having opened new accounts bearing fictitious names knowing fully
well that it was against bank policy.

The NLRC wrote that Aboc's loyalty should be first and foremost to Metrobank. This consideration
should be over and above whatever personal debts of gratitude he owed Chua.

On due process, the NLRC ruled that Metrobank fully complied with the two-notice rule under the
Labor Code.  It sent an inter-office letter dated July 16, 1998 to Aboc asking him to explain why his
services should not be terminated for cause. Subsequently, Aboc submitted a written explanation
dated February 6, 1998.  He was likewise invited to a conference, which he attended on February 10,
1998, purposely to give him the chance to explain his side and to adduce evidence in his behalf.

On the monetary awards, the NLRC explained that Aboc was entitled to receive them because he was
included in the payroll by Metrobank as he was ordered reinstated by the LA.

Both Aboc and Metrobank were not satisfied with the NLRC Decision. The former filed a motion for
reconsideration[12] while the latter filed a motion for partial reconsideration[13] on the monetary award.

On September 17, 2003, the NLRC issued a resolution[14] affirming its finding of valid dismissal but
modifying the monetary award by directing Metrobank to pay Aboc his CBA benefits during his
reinstatement pending appeal and his salary during the period stated therein, thereby partially
granting Aboc's motion for reconsideration and denying Metrobank's motion for partial consideration.

Aggrieved, Metrobank challenged the grant of monetary award in a petition[15] before the CA,
docketed as CA-G.R. SP. No. 80747, while Aboc questioned the validity of his dismissal in a petition,
[16]
 docketed as CA-G.R.SP. No. 81363. The two petitions were consolidated by the CA because they
involved the same parties and intertwined issues.

Ruling of the Court of Appeals

On October 28, 2005, the CA rendered its decision affirming the decision of the NLRC, the dispositive
portion of which reads:

WHEREFORE, judgment is hereby rendered as follows:

1. In CA-G.R. No. 807407, the petition is partially granted insofar as the finding of public respondent
on the validity and legality of the dismissal of private respondent Antonio A. Aboc.

2. In CA-G.R. No. 81363, the petition is partially granted insofar as the grant of the monetary award
in favor of petitioner Antonio A. Aboc.

No pronouncement as to costs.

SO ORDERED.[17]

The CA wrote that Aboc's participation in the organization of two (2) credit unions operating inside
Metrobank without its knowledge and consent was inimical to the welfare of the bank. The lending
and investment transactions of the credit unions directly competed with the business of Metrobank. 
Aboc held a position that required loyalty and exercise of sound judgment.

The CA also agreed with the NLRC that Aboc was duly afforded ample opportunity to defend himself
during the conference conducted on February 10, 1998 reasoning that a formal trial-type hearing was
not, at all times, essential to due process. Aboc was able to explain his side and submit evidence
during the conference.
Labor II – 1
On the monetary award, as Aboc was ordered reinstated as an employee of Metrobank pending
appeal, the CA held that he was entitled to receive his monetary claims.

Dissatisfied with the assailed CA Decision, both parties filed their respective petitions before this
Court. Aboc's petition was docketed as G.R. No. 170542-43 and Metrobank's petition as G.R. No.
176460. On June 4, 2007, this Court issued a resolution[18] consolidating the two petitions because
they have the same set of facts and involve the same parties and issues.

ISSUES

1. Whether or not the Court of Appeals erred in ruling that Antonio A. Aboc was
validly dismissed by the Metropolitan Bank and Trust Company.

2. Whether or not the Court of Appeals erred in ruling that the Metropolitan Bank
and Trust Company was liable to pay the monetary award claimed by Antonio
A. Aboc.

Position of Aboc

Aboc basically contends that:

1. Metrobank's CA petition should have been dismissed for being filed out of time and for failing to
comply with the procedural requirements. Metrobank's counsel of record, E.F. Rosello and Associates
Law Office, received a copy of the September 17, 2003 CA Resolution on September 26, 2003. 
Therefore, it had until November 25, 2003 within which to file its petition. The petition, however, was
filed after November 25, 2003 only because the Verification and Certification of Non-Forum Shopping
therein was notarized only on November 27, 2003.  Moreover, the petition did not contain a
Statement of Material Dates and Proof of Service thereof on the opposing party.

2. He was illegally dismissed as he was not guilty of serious misconduct and breach of trust.  Being
"an organizer" of credit unions like CNRI and FFA did not necessarily make him guilty of serious
misconduct or breach of trust and confidence because the operation of credit unions and cooperatives
were not prohibited or, at the very least, tolerated by Metrobank. In fact, all Metrobank branches
practically maintained credit unions of their own. Metrobank even "failed to present a single written
rule or regulation that suggested even remotely that credit unions were prohibited."[19]

3.  He was effectively deprived of his rights to due process because the interrogation conducted by
Metrobank's representatives at its head office in Manila clearly smacked of oppression, intimidation
and coercion. Metrobank exerted moral coercion, undue ascendancy and undue influence over him, a
hapless and helpless employee.

Position of Metrobank

Metrobank argues that:

1. The date of the filing of its petition should be reckoned from September 29, 2003, the date the law
firm of Rayala Alonso and Partners received the September 17, 2003 CA Resolution because said law
firm took active participation in the proceedings while the law office of E.F. Rosello and Associates
had already ceased taking active part.

2. Bank employees, as per Bank Policy, were prohibited from engaging in informal credit union
activities. Aboc engaged in an irregular activity for profit, which directly competed with Metrobank's
Labor II – 1
business. The acts committed by Aboc - organizing and acting as auditor of the CNRI and FFA credit
unions; opening the accounts of CNRI and FFA with Metrobank under his name and his companions;
soliciting investors including the clients of Metrobank; opening accounts for the credit unions under
fictitious names to hide the lending and investment activities of said credit unions; and inducing a
respondent bank's client to withdraw her account with Metrobank and to invest it instead with CNRI-
constituted wrong and improper conduct warranting dismissal for serious misconduct and loss of trust
and confidence.

3. The dispositive portion of the reversed decision of the LA merely made mention of reinstatement,
payment of backwages, 13th month pay, service incentive leave pay, and attorney's fees. It was
silent on the salary increase from January 2000 to June 2001, salary increase differentials, 13th
month pay, and award of bonuses. Therefore, these should have been deleted and no other
monetary awards should have been given to Aboc.

4. The computation of  Aboc's backwages should be limited to the rate of wage at the time of his
separation from the service, excluding the salary increases and those under the collective bargaining
agreement.  Since the salary increase from January 2000 to June 2001 would have the effect of
increasing Aboc's base salary, it should not have been awarded.  If he was not entitled to salary
increases, he should not be awarded salary increase differentials or wage differentials as well as 13th
month pay differentials.

5. The granting of a bonus is a management prerogative.  Aboc is not entitled to receive bonuses
because he participated in activities competing with Metrobank's main business instead of remaining
loyal to it.

The Court's Ruling

After an assiduous assessment of the records, the Count finds no cogent reason to disturb the
subject decision of the CA.

On the procedural issue raised by Aboc regarding Metrobank's alleged belated filing of its petition
before the CA, the records show that all pleadings filed by Metrobank, since the filing of its Motion
For Partial Reconsideration dated January 15, 2003, was prepared and filed by Rayala Alonso and
Partners. Aboc knew all along that Metrobank was being represented by said firm since his counsel
furnished the latter a copy of his motion for reconsideration.

It appears that Rayala Alonso and Partners received a copy of the September 17, 2003 NLRC decision
on September 29, 2003. For said reason, Metrobank is correct in asserting that it timely filed its
petition on November 7, 2004.

Nonetheless, granting that Metrobank belatedly filed its petition, a delay of just two (2) days should
not be fatal. Litigations should be decided on the merits of the case, not on mere technicalities.

The court has the discretion to dismiss or not to dismiss an appellant's appeal. It is a power
conferred on the court, not a duty. The discretion must be a sound one, to be exercised in
accordance with the tenets of justice and fair play, having in mind the circumstances obtaining in
each case. Technicalities, however, must be avoided. The law abhors technicalities that impede the
cause of justice. The court's primary duty is to render or dispense justice.

Litigations must be decided on their merits and not on technicality. Every party litigant must be
afforded the amplest opportunity for the proper and just determination of his cause, free from the
unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned
upon where the policy of the court is to encourage hearings of appeals on their merits and the rules
of procedure ought not to be applied in a very rigid, technical sense; rules of procedure are used only
to help secure, not override substantial justice. It is a far better and more prudent course of action
Labor II – 1
for the court to excuse a technical lapse and afford the parties a review of the case on appeal to
attain the ends of justice rather than dispose of the case on technicality and cause a grave injustice
to the parties, giving a false impression of speedy disposal of cases while actually resulting in more
delay, if not a miscarriage of justice.[20]

On Aboc's termination, Article 282 of the Labor Code states:

ART. 282. TERMINATION BY EMPLOYER. - An employer may terminate an employment for any of the
following causes:

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

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

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

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

(e) Other causes analogous to the foregoing.

In termination cases, the burden of proof rests on the employer to show that the dismissal was for a
just cause or authorized cause. An employee's dismissal due to serious misconduct and loss of trust
and confidence must be supported by substantial evidence. Substantial evidence is that amount of
relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if
other minds, equally reasonable, might conceivably opine otherwise.[21]

In the case at bench, Metrobank's evidence clearly shows that the acts of Aboc in helping Chua
organize the CNRI and FFA credit unions and in the operations thereof constituted serious misconduct
or  breach of trust and confidence. In response to the inter-office letter[22] sent by Metrobank on
January 29, 1998, Aboc submitted his Explanation[23] dated February 6, 1998, admitting having
committed said acts but claiming that he was only an "unwilling participant" doing a ministerial job.

During the investigation conducted on January 15, 1998 at Metrobank's head office in Makati City,
however, the following facts were established:

1. He was one of the organizers of the CNRI and FFA credit unions and acted as auditor of said credit
unions.

2. He and his co-organizers did not inform Metrobank about the existence of said credit unions.

3. CNRI and FFA opened an account with Metrobank under the names Wynster Chua, Judith Eva
Cabrido and Antonio Aboc.

4. He solicited investors including Metrobank clients for said credit unions, and signed as one of the
signatories in the Trust Certificate of Marlyn Belleza and Grace Lim.

5. He and Chua opened accounts for the said credit unions under the fictitious names of Vicente
Belocura and Romeo Gonzales, respectively.

6. He induced a certain Nerinilda Arcipe (Nerinilda), a non-employee of Metrobank, to withdraw her

UNISA account with Metrobank and invest it with CNRI.

Labor II – 1
7. The regional and local checks in the names of Belocura, John BK Chua, John AJ. Jazal, and
Wynster Chua, issued in connection with the business activities of CNRI and FFA were treated as bills
purchases and the proceeds thereof were immediately withdrawn without waiting for three (3) to five
(5) days clearing in violation of Metrobank's control system.

Indeed, Aboc's participation in the lending and investment activities of CNRI and FFA was highly
irregular and clearly in conflict with Metrobank's business. The irregularity of his act was evident from
the fact that he deliberately failed to inform Metrobank about the existence of CNRI and FFA. Though
he expressed apprehension and was not pleased with the way Chua was running the lending
business, he never informed or, at least, sought advice from his employer. Instead of doing so, he
actively participated in the business of Chua which competed against that of Metrobank.

Moreover, Aboc knew about the subject credit union's non-registration with the Central Bank or any
proper government institution. Being an experienced banker, he should have known that the lending
activities of the subject credit unions were questionable, if not, illegal, due to its non-registration.
Again, Aboc chose not to inform his employer about this and, instead, participated in the operations
of the subject credit unions.

The fact that Aboc opened accounts for the subject credit unions under fictitious names can only
mean that the group had something to hide.

Under the above circumstances, the Court cannot subscribe to the assertion that he was just an
"unwilling participant" doing a "ministerial" job for the subject credit unions. Certainly, the acts of 1)
opening an account under fictitious names; 2) solicitation of Metrobank clients to invest in their credit
union; 3) co-signing of trust receipts; and 4) inducement of an investor to withdraw her account and
transfer it to the subject credit unions, were certainly not "ministerial" tasks of an "unwilling
participant."  He was just not a runner doing errands for Chua; he was the auditor for CNRI and FFA
and actively participated in their lending activities.

Aboc cannot be saved by Chua's letter[24] dated February 17, 1998 explaining that Aboc had no
participation whatsoever in said lending activities. Metrobank was his employer, not Chua. Most
important, Metrobank was paying his salary and other benefits in exchange for his services.
Therefore, Aboc's loyalty should first and foremost be to Metrobank. Ironically, Aboc did not return
the favor. He chose his personal interest over that of Metrobank.

The Court cannot give weight to the argument that Metrobank was aware of the proliferation of credit
unions in practically all of its branches and did not prohibit the operation thereof. Contrary to Aboc's
position, Metrobank issued notices to all its employees regarding the prohibition on the practice of
borrowing and lending money among its officers, employees, and bank clients.  Metrobank's notices
were dated June 15, 1988[25] and August 30, 1995.[26]

Aboc's highly irregular participation in the lending business of CNRI and FFA jeopardized the business
of Metrobank. CNRI and FFA were practically competing with the business of Metrobank by soliciting
investors including clients of the bank for their credit unions.  Aboc admitted that he was able to
induce Nerinilda, the widow of a former branch accountant of Metrobank, to withdraw her UNISA
account with Metrobank and invest it with their credit union. This was confirmed by Nerinilda herself
in her affidavit[27] dated December 11, 1997.

To extricate himself, Aboc also argues that Metrobank failed to comply with the requirements of due
process in dismissing him because he was not properly investigated. According to him, the
interrogation conducted by Metrobank was done in an atmosphere of fear, oppression, intimidation,
and coercion.

The Court is not persuaded.

Labor II – 1
The evidence shows that he was afforded due process. The essence of due process is an opportunity
to be heard or, as applied to administrative proceedings, an opportunity to explain one's side. A
formal or trial-type hearing is not essential.[28] In this regard, the Court agrees with the CA when it
wrote:

Regarding the procedural requirements of notice and hearing, records show Aboc was duly notified
through the letter dated 29 January 1998 asking him to explain why his services should not be
terminated. In fact, Aboc replied to the same by submitting a written explanation on 6 February
1998. We likewise find that he was duly afforded ample opportunity to defend himself during the
conference conducted on 10 February. Aboc's contention that the conference he attended cannot
substitute the "hearing mandated by the Labor Code is bereft of merit. A formal trial-type hearing is
not at all times and in all instances essential to due process. It is enough that the parties are given a
fair and reasonable opportunity to explain their respective sides of the controversy and to present
supporting evidence on which a fair decision can be based.[29]

The Court, however, cannot also accommodate Metrobank.

The monetary award granted to Aboc was warranted under the law and jurisprudence. Article 223 of
the Labor Code reads, in part:

In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar
as the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The
employee shall either be admitted back to work under the same terms and conditions prevailing prior
to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The
posting of a bond by the employer shall not stay the execution for reinstatement provided herein.

In the case at bench, it cannot be denied that Metrobank opted to reinstate Aboc in its payroll. Since
Metrobank chose payroll reinstatement for Aboc, the Court agrees with the CA that he then became a
reinstated regular employee.  This means that he was restored to his previous position as a regular
employee without loss of seniority rights and other privileges appurtenant thereto. His payroll
reinstatement put him on equal footing with the other regular Metrobank employees insofar as
entitlement to the benefits given under the Collective Bargaining Agreement is concerned.

The fact that the decision of the LA was reversed on appeal has no controlling significance. The rule
is that even if the order of reinstatement of the LA is reversed on appeal, it is obligatory on the part
of the employer to reinstate and pay the wages of the dismissed employee during the period of
appeal until final reversal by the higher court.[30]

WHEREFORE, the October 28, 2005 Decision of the Court of Appeals is AFFIRMED.

Labor II – 1
 90.) G.R. No. 167291 : January 12, 2011

PRINCE TRANSPORT, INC. and MR. RENATO CLAROS, Petitioners, v. DIOSDADO GARCIA,

LUISITO GARCIA, RODANTE ROMERO, REX BARTOLOME, FELICIANO GASCO, JR., DANILO
ROJO, EDGAR SANFUEGO, AMADO GALANTO, EUTIQUIO LUGTU, JOEL GRAMATICA, MIEL
CERVANTES, TERESITA CABANES, ROE DELA CRUZ, RICHELO BALIDOY, VILMA PORRAS,
MIGUELITO SALCEDO, CRISTINA GARCIA, MARIO NAZARENO, DINDO TORRES, ESMAEL
RAMBOYONG, ROBETO* MANO, ROGELIO BAGAWISAN, ARIEL SNACHEZ, ESTAQULO
VILLAREAL, NELSON MONTERO, GLORIA ORANTE, HARRY TOCA, PABLITO MACASAET and
RONALD GARCITA, Respondents.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari  under Rule 45 of the Rules of Court praying for
the annulment of the Decision1  and Resolution2  of the Court of Appeals (CA) dated December 20,
cralaw cralaw

2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953. The assailed Decision reversed
and set aside the Resolutions dated May 30, 20033  and September 26, 20034  of the National Labor
cralaw cralaw

Relations Commission (NLRC) in CA No. 029059-01,while the disputed Resolution denied petitioners'
Motion for Reconsideration.

The present petition arose from various complaints filed by herein respondents charging petitioners
with illegal dismissal, unfair labor practice and illegal deductions and praying for the award of
premium pay for holiday and rest day, holiday pay, service leave pay, 13th month pay, moral and
exemplary damages and attorney's fees.

Respondents alleged in their respective position papers and other related pleadings that they were
employees of Prince Transport, Inc. (PTI), a company engaged in the business of transporting
passengers by land; respondents were hired either as drivers, conductors, mechanics or inspectors,
except for respondent Diosdado Garcia (Garcia), who was assigned as Operations Manager; in
addition to their regular monthly income, respondents also received commissions equivalent to 8 to
10% of their wages; sometime in October 1997, the said commissions were reduced to 7 to 9%; this
led respondents and other employees of PTI to hold a series of meetings to discuss the protection of
their interests as employees; these meetings led petitioner Renato Claros, who is the president of
PTI, to suspect that respondents are about to form a union; he made known to Garcia his objection
to the formation of a union; in December 1997, PTI employees requested for a cash advance, but the
same was denied by management which resulted in demoralization on the employees' ranks; later,
PTI acceded to the request of some, but not all, of the employees; the foregoing circumstances led
respondents to form a union for their mutual aid and protection; in order to block the continued
formation of the union, PTI caused the transfer of all union members and sympathizers to one of its
sub-companies, Lubas Transport (Lubas); despite such transfer, the schedule of drivers and
conductors, as well as their company identification cards, were issued by PTI; the daily time records,
tickets and reports of the respondents were also filed at the PTI office; and, all claims for salaries
were transacted at the same office; later, the business of Lubas deteriorated because of the refusal
of PTI to maintain and repair the units being used therein, which resulted in the virtual stoppage of
its operations and respondents' loss of employment.

Petitioners, on the other hand, denied the material allegations of the complaints contending that
herein respondents were no longer their employees, since they all transferred to Lubas at their own
request; petitioners have nothing to do with the management and operations of Lubas as well as the
control and supervision of the latter's employees; petitioners were not aware of the existence of any
union in their company and came to know of the same only in June 1998 when they were served a

Labor II – 1
copy of the summons in the petition for certification election filed by the union; that before the union
was registered on April 15, 1998, the complaint subject of the present petition was already filed; that
the real motive in the filing of the complaints was because PTI asked respondents to vacate the
bunkhouse where they (respondents) and their respective families were staying because PTI wanted
to renovate the same.

Subsequently, the complaints filed by respondents were consolidated.

On October 25, 2000, the Labor Arbiter rendered a Decision,5  the dispositive portion of which reads cralaw

as follows:  chanrob1esvirtwallawlibrary

WHEREFORE, judgment is hereby rendered:  chanrob1esvirtwallawlibrary

1. Dismissing the complaints for Unfair Labor Practice, non-payment of holiday pay and holiday
premium, service incentive leave pay and 13 th month pay;  chanroblesvirtualawlibrary

Dismissing the complaint of Edgardo Belda for refund of boundary-hulog;  chanroblesvirtualawlibrary

2. Dismissing the complaint for illegal dismissal against the respondents Prince Transport, Inc. and/or
Prince Transport Phils. Corporation, Roberto Buenaventura, Rory Bayona, Ailee Avenue, Nerissa Uy,
Mario Feranil and Peter Buentiempo;  chanroblesvirtualawlibrary

3. Declaring that the complainants named below are illegally dismissed by Lubas Transport; ordering
said Lubas Transport to pay backwages and separation pay in lieu of reinstatement in the following
amount:  chanrob1esvirtwallawlibrary

Complainants Backwages Separation Pay

 
Complainants  Backwages  Separation Pay
            (1) Diosdado Garcia               P222,348.70                P79,456.00
(2) Feliciano Gasco, Jr.              203,350.00                 54,600.00
            (3) Pablito Macasaet                  145,250.00                 13,000.00
            (4) Esmael Ramboyong              221,500.00                 30,000.00
            (5) Joel Gramatica                      221,500.00                 60,000.00
            (6) Amado Galanto                    130,725.00                 29,250.00
            (7) Miel Cervantes                     265,800.00                 60,000.00
            (8) Roberto Mano                      221,500.00                 50,000.00
            (9) Roe dela Cruz                       265,800.00                 60,000.00
            (10) Richelo Balidoy                  130,725.00                 29,250.00
            (11) Vilma Porras                       221,500.00                 70,000.00
            (12) Miguelito Salcedo              265,800.00                 60,000.00
            (13) Cristina Garcia                    130,725.00                 35,100.00
            (14) Luisito Garcia                     145,250.00                 19,500.00
            (15) Rogelio Bagawisan             265,800.00                 60,000.00
(16) Rodante H. Romero           221,500.00                 60,000.00
            (17) Dindo Torres                      265,800.00                 50,000.00
            (18) Edgar Sanfuego                  221,500.00                 40,000.00
            (19) Ronald Gacita                    221,500.00                 40,000.00
            (20) Harry Toca                          174,300.00                 23,400.00
            (21) Amado Galanto                  130,725.00                 17,550.00
            (22) Teresita Cabañes                 130,725.00                 17,550.00
Labor II – 1
             (23) Rex Bartolome                   301,500.00                 30,000.00
            (24) Mario Nazareno                  221,500.00                 30,000.00
            (25) Eustaquio Villareal             145,250.00                 19,500.00 
            (26) Ariel Sanchez                     265,800.00                 60,000.00
            (27) Gloria Orante                      263,100.00                 60,000.00
            (28) Nelson Montero                  264,600.00                 60,000.00
            (29) Rizal Beato                         295,000.00                 40,000.00
            (30) Eutiquio Lugtu                   354,000.00                 48,000.00
            (31) Warlito Dickensomn          295,000.00                 40,000.00
            (32) Edgardo Belda                   354,000.00                 84,000.00
            (33) Tita Go                               295,000.00                 70,000.00
            (34) Alex Lodor                         295,000.00                 50,000.00
            (35) Glenda Arguilles                295,000.00                 40,000.00
            (36) Erwin Luces                       354,000.00                 48,000.00
            (37) Jesse Celle                          354,000.00                 48,000.00
            (38) Roy Adorable                     295,000.00                 40,000.00
            (39) Marlon Bangcoro                295,000.00                 40,000.00
            (40)Edgardo Bangcoro              354,000.00                 36,000.00
   chanroblesvirtualawlibrary

4. Ordering Lubas Transport to pay attorney's fees equivalent to ten (10%) of the total monetary
award; and

6. Ordering the dismissal of the claim for moral and exemplary damages for lack merit.

SO ORDERED.6 cralawredlaw

The Labor Arbiter ruled that petitioners are not guilty of unfair labor practice in the absence of
evidence to show that they violated respondents' right to self-organization. The Labor Arbiter also
held that Lubas is the respondents' employer and that it (Lubas) is an entity which is separate,
distinct and independent from PTI. Nonetheless, the Labor Arbiter found that Lubas is guilty of
illegally dismissing respondents from their employment.

Respondents filed a Partial Appeal with the NLRC praying, among others, that PTI should also be held
equally liable as Lubas.

In a Resolution dated May 30, 2003, the NLRC modified the Decision of the Labor Arbiter and
disposed as follows:  chanrob1esvirtwallawlibrary

WHEREFORE, premises considered, the appeal is hereby PARTIALLY GRANTED. Accordingly, the

Decision appealed from is SUSTAINED subject to the modification that Complainant-Appellant
Edgardo Belda deserves refund of his boundary-hulog in the amount of P 446,862.00; and that
Complainants-Appellants Danilo Rojo and Danilo Laurel should be included in the computation of
Complainants-Appellants claim as follows:  chanrob1esvirtwallawlibrary

Complainants  Backwages  Separation Pay

41. Danilo Rojo           P355,560.00                P48,000.00
42. Danilo Laurel        P357,960.00                P72,000.00

As regards all other aspects, the Decision appealed from is SUSTAINED.

SO ORDERED.7 cralawredlaw

Labor II – 1
Respondents filed a Motion for Reconsideration, but the NLRC denied it in its Resolution8  dated cralaw

September 26, 2003.

Respondents then filed a special civil action for certiorari with the CA assailing the Decision and
Resolution of the NLRC.

On December 20, 2004, the CA rendered the herein assailed Decision which granted respondents'
petition. The CA ruled that petitioners are guilty of unfair labor practice; that Lubas is a mere
instrumentality, agent conduit or adjunct of PTI; and that petitioners' act of transferring respondents'
employment to Lubas is indicative of their intent to frustrate the efforts of respondents to organize
themselves into a union. Accordingly, the CA disposed of the case as follows:  chanrob1esvirtwallawlibrary

WHEREFORE , the Petition for Certiorari is hereby GRANTED. Accordingly, the subject decision is
hereby REVERSED and SET ASIDE and another one ENTERED finding the respondents guilty of unfair
labor practice and ordering them to reinstate the petitioners to their former positions without loss of
seniority rights and with full backwages.

With respect to the portion ordering the inclusion of Danilo Rojo and Danilo Laurel in the computation
of petitioner's claim for backwages and with respect to the portion ordering the refund of Edgardo
Belda's boundary-hulog in the amount of P 446,862.00, the NLRC decision is affirmed and
maintained.

SO ORDERED.9 cralawredlaw

Petitioners filed a Motion for Reconsideration, but the CA denied it via its Resolution10  dated February cralaw

24, 2005.

Hence, the instant petition for review on certiorari based on the following grounds:  chanrob1esvirtwallawlibrary

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN GIVING DUE COURSE TO
THE RESPONDENTS' PETITION FOR CERTIORARI

1. THE COURT OF APPEALS SHOULD HAVE RESPECTED THE FINDINGS OF THE LABOR ARBITER AND
AFFIRMED BY THE NLRC

2. ONLY ONE PETITIONER EXECUTED AND VERIFIED THE PETITION

3. THE COURT OF APPEALS SHOULD NOT HAVE GIVEN DUE COURSE TO THE PETITION WITH
RESPECT TO RESPONDENTS REX BARTOLOME, FELICIANO GASCO, DANILO ROJO, EUTIQUIO LUGTU,
AND NELSON MONTERO AS THEY FAILED TO FILE AN APPEAL TO THE NLRC

THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT PETITIONERS PRINCE TRANSPORT,
INC. AND MR. RENATO CLAROS AND LUBAS TRANSPORT ARE ONE AND THE SAME CORPORATION
AND THUS, LIABLE IN SOLIDUM TO RESPONDENTS.

Labor II – 1
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN ORDERING THE
REINSTATEMENT OF RESPONDENTS TO THEIR PREVIOUS POSITION WHEN IT IS NOT ONE OF THE
ISSUES RAISED IN RESPONDENTS' PETITION FOR CERTIORARI.11 cralawredlaw

Petitioners assert that factual findings of agencies exercising quasi-judicial functions like the NLRC
are accorded not only respect but even finality; that the CA should have outrightly dismissed the
petition filed before it because in certiorari proceedings under Rule 65 of the Rules of Court it is not
within the province of the CA to evaluate the sufficiency of evidence upon which the NLRC based its
determination, the inquiry being limited essentially to whether or not said tribunal has acted without
or in excess of its jurisdiction or with grave abuse of discretion. Petitioners assert that the CA can
only pass upon the factual findings of the NLRC if they are not supported by evidence on record, or if
the impugned judgment is based on misapprehension of facts - which circumstances are not present
in this case. Petitioners also emphasize that the NLRC and the Labor Arbiter concurred in their factual
findings which were based on substantial evidence and, therefore, should have been accorded great
weight and respect by the CA.

Respondents, on the other hand, aver that the CA neither exceeded its jurisdiction nor committed
error in re-evaluating the NLRC's factual findings since such findings are not in accord with the
evidence on record and the applicable law or jurisprudence.

The Court agrees with respondents.

The power of the CA to review NLRC decisions via  a petition for certiorari under Rule 65 of the Rules
of Court has been settled as early as this Court's decision in St. Martin Funeral Homes v. NLRC.12  In cralaw

said case, the Court held that the proper vehicle for such review is a special civil action
for certiorari under Rule 65 of the said Rules, and that the case should be filed with the CA in strict
observance of the doctrine of hierarchy of courts. Moreover, it is already settled that under Section 9
of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, the CA - pursuant to the
exercise of its original jurisdiction over petitions forcertiorari - is specifically given the power to pass
upon the evidence, if and when necessary, to resolve factual issues.13  Section 9 clearly states: 
cralaw chanrob1esvirtwallawlibrary

xxx

The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and
perform any and all acts necessary to resolve factual issues raised in cases falling within its original
and appellate jurisdiction, including the power to grant and conduct new trials or further proceedings.
xxx

However, equally settled is the rule that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but
even finality by the courts when supported by substantial evidence, i.e., the amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion.14  But these cralaw

findings are not infallible. 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.15  The CA can grant the
cralaw

petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, made a factual
finding not supported by substantial evidence.16  It is within the jurisdiction of the CA, whose
cralaw

jurisdiction over labor cases has been expanded to review the findings of the NLRC.17 cralawredlaw

In this case, the NLRC sustained the factual findings of the Labor Arbiter. Thus, these findings are
generally binding on the appellate court, unless there was a showing that they were arrived at
arbitrarily or in disregard of the evidence on record. In respondents' petition for certiorari with the
CA, these factual findings were reexamined and reversed by the appellate court on the ground that
they were not in accord with credible evidence presented in this case. To determine if the CA's

Labor II – 1
reexamination of factual findings and reversal of the NLRC decision are proper and with sufficient
basis, it is incumbent upon this Court to make its own evaluation of the evidence on record.18 cralawredlaw

After a thorough review of the records at hand, the Court finds that the CA did not commit error in
arriving at its own findings and conclusions for reasons to be discussed hereunder.

Firstly, petitioners posit that the petition filed with the CA is fatally defective, because the attached
verification and certificate against forum shopping was signed only by respondent Garcia.

The Court does not agree.

While the general rule is that the certificate of non-forum shopping must be signed by all the
plaintiffs in a case and the signature of only one of them is insufficient, the Court has stressed that
the rules on forum shopping, which were designed to promote and facilitate the orderly
administration of justice, should not be interpreted with such absolute literalness as to subvert its
own ultimate and legitimate objective.19  Strict compliance with the provision regarding the certificate
cralaw

of non-forum shopping underscores its mandatory nature in that the certification cannot be
altogether dispensed with or its requirements completely disregarded.20  It does not, however,
cralaw

prohibit substantial compliance therewith under justifiable circumstances, considering especially that
although it is obligatory, it is not jurisdictional.21 cralawredlaw

In a number of cases, the Court has consistently held that when all the petitioners share a common
interest and invoke a common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the rules.22  In the present case,
cralaw

there is no question that respondents share a common interest and invoke a common cause of
action. Hence, the signature of respondent Garcia is a sufficient compliance with the rule governing
certificates of non-forum shopping. In the first place, some of the respondents actually executed a
Special Power of Attorney authorizing Garcia as their attorney-in-fact in filing a petition
for certiorari with the CA.23
cralawredlaw

The Court, likewise, does not agree with petitioners' argument that the CA should not have given due
course to the petition filed before it with respect to some of the respondents, considering that these
respondents did not sign the verification attached to the Memorandum of Partial Appeal earlier filed
with the NLRC. Petitioners assert that the decision of the Labor Arbiter has become final and
executory with respect to these respondents and, as a consequence, they are barred from filing a
petition for certiorari with the CA.

With respect to the absence of some of the workers' signatures in the verification, the verification
requirement is deemed substantially complied with when some of the parties who undoubtedly have
sufficient knowledge and belief to swear to the truth of the allegations in the petition had signed the
same. Such verification is deemed a sufficient assurance that the matters alleged in the petition have
been made in good faith or are true and correct, and not merely speculative. Moreover, respondents'
Partial Appeal shows that the appeal stipulated as complainants-appellants "Rizal Beato, et al.",
meaning that there were more than one appellant who were all workers of petitioners.

In any case, the settled rule is that a pleading which is required by the Rules of Court to be verified,
may be given due course even without a verification if the circumstances warrant the suspension of
the rules in the interest of justice.24  Indeed, the absence of a verification is not jurisdictional, but
cralaw

only a formal defect, which does not of itself justify a court in refusing to allow and act on a
case.25  Hence, the failure of some of the respondents to sign the verification attached to their
cralaw

Memorandum of Appeal filed with the NLRC is not fatal to their cause of action.

Petitioners also contend that the CA erred in applying the doctrine of piercing the corporate veil with
respect to Lubas, because the said doctrine is applicable only to corporations and Lubas is not a
Labor II – 1
corporation but a single proprietorship; that Lubas had been found by the Labor Arbiter and the NLRC
to have a personality which is separate and distinct from that of PTI; that PTI had no hand in the
management and operation as well as control and supervision of the employees of Lubas.

The Court is not persuaded.

On the contrary, the Court agrees with the CA that Lubas is a mere agent, conduit or adjunct of PTI.
A settled formulation of the doctrine of piercing the corporate veil is that when two business
enterprises are owned, conducted and controlled by the same parties, both law and equity will, when
necessary to protect the rights of third parties, disregard the legal fiction that these two entities are
distinct and treat them as identical or as one and the same.26  In the present case, it may be true
cralaw

that Lubas is a single proprietorship and not a corporation. However, petitioners' attempt to isolate
themselves from and hide behind the supposed separate and distinct personality of Lubas so as to
evade their liabilities is precisely what the classical doctrine of piercing the veil of corporate entity
seeks to prevent and remedy.

Thus, the Court agrees with the observations of the CA, to wit:  chanrob1esvirtwallawlibrary

As correctly pointed out by petitioners, if Lubas were truly a separate entity, how come that it was
Prince Transport who made the decision to transfer its employees to the former? Besides, Prince
Transport never regarded Lubas Transport as a separate entity. In the aforesaid letter, it referred to
said entity as "Lubas operations." Moreover, in said letter, it did not transfer the employees; it
"assigned" them. Lastly, the existing funds and 201 file of the employees were turned over not to a
new company but a "new management."27 cralawredlaw

The Court also agrees with respondents that if Lubas is indeed an entity separate and independent
from PTI why is it that the latter decides which employees shall work in the former?

What is telling is the fact that in a memorandum issued by PTI, dated January 22, 1998, petitioner
company admitted that Lubas is one of its sub-companies.28  In addition, PTI, in its letters to its
cralaw

employees who were transferred to Lubas, referred to the latter as its "New City Operations Bus."29 cralawredlaw

Moreover, petitioners failed to refute the contention of respondents that despite the latter's transfer
to Lubas of their daily time records, reports, daily income remittances of conductors, schedule of
drivers and conductors were all made, performed, filed and kept at the office of PTI. In fact,
respondents' identification cards bear the name of PTI.

It may not be amiss to point out at this juncture that in two separate illegal dismissal cases involving
different groups of employees transferred by PTI to other companies, the Labor Arbiter handling the
cases found that these companies and PTI are one and the same entity; thus, making them solidarily
liable for the payment of backwages and other money claims awarded to the complainants therein.30 cralawredlaw

Petitioners likewise aver that the CA erred and committed grave abuse of discretion when
it ordered petitioners to reinstate respondents to their former positions, considering that
the issue of reinstatement was never brought up before it and respondents never
questioned the award of separation pay to them.

The Court is not persuaded.

It is clear from the complaints filed by respondents that they are seeking reinstatement.31 cralawredlaw

In any case, Section 2 (c), Rule 7 of the Rules of Court provides that a pleading shall specify the
relief sought, but may add a general prayer for such further or other reliefs as may be deemed just
and equitable. Under this rule, a court can grant the relief warranted by the allegation and the proof
Labor II – 1
even if it is not specifically sought by the injured party; the inclusion of a general prayer may justify
the grant of a remedy different from or together with the specific remedy sought, if the facts alleged
in the complaint and the evidence introduced so warrant.32 cralawredlaw

Moreover, in BPI Family Bank v. Buenaventura,33  this Court ruled that the general prayer is broad
cralaw

enough "to justify extension of a remedy different from or together with the specific remedy sought."
Even without the prayer for a specific remedy, proper relief may be granted by the court if the facts
alleged in the complaint and the evidence introduced so warrant. The court shall grant relief
warranted by the allegations and the proof even if no such relief is prayed for. The prayer in the
complaint for other reliefs equitable and just in the premises justifies the grant of a relief not
otherwise specifically prayed for.34  In the instant case, aside from their specific prayer for
cralaw

reinstatement, respondents, in their separate complaints, prayed for such reliefs which are deemed
just and equitable.

As to whether petitioners are guilty of unfair labor practice, the Court finds no cogent reason to
depart from the findings of the CA that respondents' transfer of work assignments to Lubas was
designed by petitioners as a subterfuge to foil the former's right to organize themselves into a union.
Under Article 248 (a) and (e) of the Labor Code, an employer is guilty of unfair labor practice if it
interferes with, restrains or coerces its employees in the exercise of their right to self-organization or
if it discriminates in regard to wages, hours of work and other terms and conditions of employment in
order to encourage or discourage membership in any labor organization.

Indeed, evidence of petitioners' unfair labor practice is shown by the established fact that, after
respondents' transfer to Lubas, petitioners left them high and dry insofar as the operations of Lubas
was concerned. The Court finds no error in the findings and conclusion of the CA that petitioners
"withheld the necessary financial and logistic support such as spare parts, and repair and
maintenance of the transferred buses until only two units remained in running condition." This left
respondents virtually jobless.

WHEREFORE , the instant petition is denied. The assailed Decision and Resolution of the Court of
Appeals, dated December 20, 2004 and February 24, 2005, respectively, in CA-G.R. SP No. 80953,
are AFFIRMED.

Labor II – 1
 91.) G.R. No. 177937 : January 19, 2011

ROBINSONS GALLERIA/ROBINSONS SUPERMARKET CORPORATION and/or JESS

MANUEL, Petitioners, v. IRENE R. RANCHEZ, Respondent.

DECISION

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing
the Decision1  dated August 29, 2006 and the Resolution2  dated May 16, 2007 of the Court of
cralaw cralaw

Appeals (CA) in CA-G.R. SP No. 91631.

The Facts

The facts of the case are as follows.

Respondent was a probationary employee of petitioner Robinsons Galleria/Robinsons Supermarket

Corporation (petitioner Supermarket) for a period of five (5) months, or from October 15, 1997 until
March 14, 1998.3  She underwent six (6) weeks of training as a cashier before she was hired as such
cralaw

on October 15, 1997.4 cralawredlaw

Two weeks after she was hired, or on October 30, 1997, respondent reported to her supervisor the
loss of cash amounting to Twenty Thousand Two Hundred Ninety-Nine Pesos ( P 20,299.00) which
she had placed inside the company locker. Petitioner Jess Manuel (petitioner Manuel), the Operations
Manager of petitioner Supermarket, ordered that respondent be strip-searched by the company
guards. However, the search on her and her personal belongings yielded nothing.5 cralawredlaw

Respondent acknowledged her responsibility and requested that she be allowed to settle and pay the
lost amount. However, petitioner Manuel did not heed her request and instead reported the matter to
the police. Petitioner Manuel likewise requested the Quezon City Prosecutor's Office for an inquest.6 cralawredlaw

On November 5, 1997, an information for Qualified Theft was filed with the Quezon City Regional
Trial Court. Respondent was constrained to spend two weeks in jail for failure to immediately post
bail in the amount of Forty Thousand Pesos ( P 40,000.00).7 cralawredlaw

On November 25, 1997, respondent filed a complaint for illegal dismissal and damages.8 cralawredlaw

On March 12, 1998, petitioners sent to respondent by mail a notice of termination and/or notice of
expiration of probationary employment dated March 9, 1998.9 cralawredlaw

On August 10, 1998, the Labor Arbiter rendered a decision,10  the fallo of which reads:  cralaw chanrob1esvirtwallawlibrary

CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered dismissing the claim of
illegal dismissal for lack of merit.

Respondents are ordered to accept complainant to her former or equivalent work without prejudice to
any action they may take in the premises in connection with the missing money of P 20,299.00.

SO ORDERED.11 cralawredlaw

Labor II – 1
In dismissing the complaint for illegal dismissal, the Labor Arbiter ratiocinated that at the time
respondent filed the complaint for illegal dismissal, she was not yet dismissed by petitioners. When
she was strip- searched by the security personnel of petitioner Supermarket, the guards were merely
conducting an investigation. The subsequent referral of the loss to the police authorities might be
considered routine. Respondent's non-reporting for work after her release from detention could be
taken against her in the investigation that petitioner supermarket would conduct.12 cralawredlaw

On appeal, the National Labor Relations Commission (NLRC) reversed the decision of the Labor
Arbiter in a decision13  dated October 20, 2003. The dispositive portion of the decision reads: 
cralaw chanrob1esvirtwallawlibrary

WHEREFORE, the appealed decision is SET ASIDE. The respondents are hereby ordered to
immediately reinstate complainant to her former or equivalent position without loss of seniority rights
and privileges and to pay her full backwages computed from the time she was constructively
dismissed on October 30, 1997 up to the time she is actually reinstated.

SO ORDERED.14 cralawredlaw

In reversing the decision of the Labor Arbiter, the NLRC ruled that respondent was denied due
process by petitioners. Strip-searching respondent and sending her to jail for two weeks certainly
amounted to constructive dismissal because continued employment had been rendered impossible,
unreasonable, and unlikely. The wedge that had been driven between the parties was impossible to
ignore.15  Although respondent was only a probationary employee, the subsequent lapse of her
cralaw

probationary contract of employment did not have the effect of validly terminating her employment
because constructive dismissal had already been effected earlier by petitioners.16 cralawredlaw

Petitioners filed a motion for reconsideration, which was denied by the NLRC in a resolution17  dated cralaw

July 21, 2005.

Petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before the CA. On August
29, 2006, the CA rendered a Decision, the dispositive portion of which reads:  chanrob1esvirtwallawlibrary

WHEREFORE, premises considered, the challenged Decision of the National Labor Relations
Commission is AFFIRMED with MODIFICATION in that should reinstatement be no longer possible
in view of the strained relation between the parties, Petitioners are ordered to pay Respondent
separation pay equivalent to one (1) month pay in addition to backwages from the date of dismissal
until the finality of the assailed decision.

SO ORDERED.18 cralawredlaw

Petitioners filed a motion for reconsideration. However, the CA denied the same in a Resolution dated
May 16, 2007.

Hence, this petition.

Petitioners assail the reinstatement of respondent, highlighting the fact that she was a
probationary employee and that her probationary contract of employment lapsed on March
14, 1998. Thus, her reinstatement was rendered moot and academic. Furthermore, even if
her probationary contract had not yet expired, the offense that she committed would nonetheless
militate against her regularization.19 cralawredlaw

On the other hand, respondent insists that she was constructively dismissed by petitioner
Supermarket when she was strip-searched, divested of her dignity, and summarily thrown in jail. She
could not have been expected to go back to work after being allowed to post bail because her
continued employment had been rendered impossible, unreasonable, and unlikely. She stresses that,
Labor II – 1
at the time the money was discovered missing, it was not with her but locked in the company locker.
The company failed to provide its cashiers with strong locks and proper security in the work place.
Respondent argues that she was not caught in the act and even reported that the money was
missing. She claims that she was denied due process.20 cralawredlaw

The Issue

The sole issue for resolution is whether respondent was illegally terminated from
employment by petitioners.

The Ruling of the Court

We rule in the affirmative.

There is probationary employment when the employee upon his engagement is made to undergo a
trial period during which the employer determines his fitness to qualify for regular employment based
on reasonable standards made known to him at the time of engagement.21 cralawredlaw

A probationary employee, like a regular employee, enjoys security of tenure.22  However, in cases of cralaw

probationary employment, aside from just or authorized causes of termination, an additional ground
is provided under Article 281 of the Labor Code, i. e., the probationary employee may also be
terminated for failure to qualify as a regular employee in accordance with reasonable standards made
known by the employer to the employee at the time of the engagement. Thus, the services of an
employee who has been engaged on probationary basis may be terminated for any of the following:
(1) a just or (2) an authorized cause; and (3) when he fails to qualify as a regular employee in
accordance with reasonable standards prescribed by the employer.23 cralawredlaw

Article 277(b) of the Labor Code mandates that subject to the constitutional right of workers to
security of tenure and their right to be protected against dismissal, except for just and authorized
cause and without prejudice to the requirement of notice under Article 283 of the same Code, the
employer shall furnish the worker, whose employment is sought to be terminated, a written notice
containing a statement of the causes of termination, and shall afford the latter ample opportunity to
be heard and to defend himself with the assistance of a representative if he so desires, in accordance
with company rules and regulations pursuant to the guidelines set by the Department of Labor and
Employment.

In the instant case, based on the facts on record, petitioners failed to accord respondent substantive
and procedural due process. The haphazard manner in the investigation of the missing cash, which
was left to the determination of the police authorities and the Prosecutor's Office, left respondent
with no choice but to cry foul. Administrative investigation was not conducted by petitioner
Supermarket. On the same day that the missing money was reported by respondent to her
immediate superior, the company already pre-judged her guilt without proper investigation, and
instantly reported her to the police as the suspected thief, which resulted in her languishing in jail for
two weeks.

As correctly pointed out by the NLRC, the due process requirements under the Labor Code are
mandatory and may not be supplanted by police investigation or court proceedings. The criminal
aspect of the case is considered independent of the administrative aspect. Thus, employers should
not rely solely on the findings of the Prosecutor's Office. They are mandated to conduct their own
separate investigation, and to accord the employee every opportunity to defend himself.
Furthermore, respondent was not represented by counsel when she was strip-searched inside the
company premises or during the police investigation, and in the preliminary investigation before the
Prosecutor's Office.

Labor II – 1
Respondent was constructively dismissed by petitioner Supermarket effective October 30, 1997. It
was unreasonable for petitioners to charge her with abandonment for not reporting for work upon her
release in jail. It would be the height of callousness to expect her to return to work after suffering in
jail for two weeks. Work had been rendered unreasonable, unlikely, and definitely impossible,
considering the treatment that was accorded respondent by petitioners.

As to respondent's monetary claims, Article 279 of the Labor Code provides that an employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges, to full backwages, inclusive of allowances, and to 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, due to the strained relations of the parties, the payment of
separation pay has been considered an acceptable alternative to reinstatement, when the latter
option is no longer desirable or viable. On the one hand, such payment liberates the employee from
what could be a highly oppressive work environment. On the other, the payment releases the
employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no
longer trust.24cralawredlaw

Thus, as an illegally or constructively dismissed employee, respondent is entitled to: (1) either
reinstatement, if viable, or separation pay, if reinstatement is no longer viable; and (2) backwages.
These two reliefs are separate and distinct from each other and are awarded conjunctively.25 cralawredlaw

In this case, since respondent was a probationary employee at the time she was constructively
dismissed by petitioners, she is entitled to separation pay and backwages. Reinstatement of
respondent is no longer viable considering the circumstances.

However, the backwages that should be awarded to respondent shall be reckoned from the time of
her constructive dismissal until the date of the termination of her employment, i.e., from October 30,
1997 to March 14, 1998. The computation should not cover the entire period from the time
her compensation was withheld up to the time of her actual reinstatement. This is because
respondent was a probationary employee, and the lapse of her probationary employment
without her appointment as a regular employee of petitioner Supermarket effectively
severed the employer-employee relationship between the parties.

In all cases involving employees engaged on probationary basis, the employer shall make known to
its employees the standards under which they will qualify as regular employees at the time of their
engagement. Where no standards are made known to an employee at the time, he shall be deemed a
regular employee,26  unless the job is self-descriptive, like maid, cook, driver, or messenger.
cralaw

However, the constitutional policy of providing full protection to labor is not intended to oppress or
destroy management.27  Naturally, petitioner Supermarket cannot be expected to retain respondent
cralaw

as a regular employee considering that she lost P 20,299.00 while acting as a cashier during the
probationary period. The rules on probationary employment should not be used to exculpate a
probationary employee who acts in a manner contrary to basic knowledge and common sense, in
regard to which, there is no need to spell out a policy or standard to be met.28cralawredlaw

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the Court of Appeals
in CA-G.R. SP No. 91631 is hereby AFFIRMED with the MODIFICATION that petitioners are hereby
ordered to pay respondent Irene R. Ranchez separation pay equivalent to one (1) month pay and
backwages from October 30, 1997 to March 14, 1998.

Labor II – 1
92.) G.R. No. 177467               March 9, 2011

PFIZER, INC. AND/OR REY GERARDO BACARRO, AND/OR FERDINAND CORTES, AND/OR ALFRED
MAGALLON, AND/OR ARISTOTLE ARCE, Petitioners,
vs.
GERALDINE VELASCO, Respondent.

DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure to annul and set aside the
Resolution1 dated October 23, 2006 as well as the Resolution2 dated April 10, 2007 both issued by the Court of
Appeals in CA-G.R. SP No. 88987 entitled, "Pfizer, Inc. and/or Rey Gerardo Bacarro, and/or Ferdinand Cortes,
and/or Alfred Magallon, and/or Aristotle Arce v. National Labor Relations Commission Second Division and
Geraldine Velasco." The October 23, 2006 Resolution modified upon respondent’s motion for reconsideration the
Decision3 dated November 23, 2005 of the Court of Appeals by requiring PFIZER, Inc. (PFIZER) to pay
respondent’s wages from the date of the Labor Arbiter’s Decision4 dated December 5, 2003 until it was eventually
reversed and set aside by the Court of Appeals. The April 10, 2007 Resolution, on the other hand, denied PFIZER’s
motion for partial reconsideration.

The facts of this case, as stated in the Court of Appeals Decision dated November 23, 2005, are as follows:

Private respondent Geraldine L. Velasco was employed with petitioner PFIZER, INC. as Professional Health Care
Representative since 1 August 1992. Sometime in April 2003, Velasco had a medical work up for her high-risk
pregnancy and was subsequently advised bed rest which resulted in her extending her leave of absence. Velasco
filed her sick leave for the period from 26 March to 18 June 2003, her vacation leave from 19 June to 20 June 2003,
and leave without pay from 23 June to 14 July 2003.

On 26 June 2003, while Velasco was still on leave, PFIZER through its Area Sales Manager, herein petitioner
Ferdinand Cortez, personally served Velasco a "Show-cause Notice" dated 25 June 2003. Aside from mentioning
about an investigation on her possible violations of company work rules regarding "unauthorized deals and/or
discounts in money or samples and unauthorized withdrawal and/or pull-out of stocks" and instructing her to submit
her explanation on the matter within 48 hours from receipt of the same, the notice also advised her that she was
being placed under "preventive suspension" for 30 days or from that day to 6 August 2003 and consequently
ordered to surrender the following "accountabilities;" 1) Company Car, 2) Samples and Promats, 3)
CRF/ER/VEHICLE/SOA/POSAP/MPOA and other related Company Forms, 4) Cash Card, 5) Caltex Card, and 6)
MPOA/TPOA Revolving Travel Fund. The following day, petitioner Cortez together with one Efren Dariano retrieved
the above-mentioned "accountabilities" from Velasco’s residence.

In response, Velasco sent a letter addressed to Cortez dated 28 June 2003 denying the charges. In her letter,
Velasco claimed that the transaction with Mercury Drug, Magsaysay Branch covered by her check (no. 1072) in the
amount of ₱23,980.00 was merely to accommodate two undisclosed patients of a certain Dr. Renato Manalo. In
support thereto, Velasco attached the Doctor’s letter and the affidavit of the latter’s secretary.

On 12 July 2003, Velasco received a "Second Show-cause Notice" informing her of additional developments in their
investigation. According to the notice, a certain Carlito Jomen executed an affidavit pointing to Velasco as the one
who transacted with a printing shop to print PFIZER discount coupons. Jomen also presented text messages
originating from Velasco’s company issued cellphone referring to the printing of the said coupons. Again, Velasco
was given 48 hours to submit her written explanation on the matter. On 16 July 2003, Velasco sent a letter to
PFIZER via Aboitiz courier service asking for additional time to answer the second Show-cause Notice.

That same day, Velasco filed a complaint for illegal suspension with money claims before the Regional Arbitration
Branch. The following day, 17 July 2003, PFIZER sent her a letter inviting her to a disciplinary hearing to be held on
22 July 2003. Velasco received it under protest and informed PFIZER via the receiving copy of the said letter that

Labor II – 1
she had lodged a complaint against the latter and that the issues that may be raised in the July 22 hearing "can be
tackled during the hearing of her case" or at the preliminary conference set for 5 and 8 of August 2003. She likewise
opted to withhold answering the Second Show-cause Notice. On 25 July 2003, Velasco received a "Third Show-
cause Notice," together with copies of the affidavits of two Branch Managers of Mercury Drug, asking her for her
comment within 48 hours. Finally, on 29 July 2003, PFIZER informed Velasco of its "Management Decision"
terminating her employment.

On 5 December 2003, the Labor Arbiter rendered its decision declaring the dismissal of Velasco illegal, ordering her
reinstatement with backwages and further awarding moral and exemplary damages with attorney’s fees. On appeal,
the NLRC affirmed the same but deleted the award of moral and exemplary damages.5

The dispositive portion of the Labor Arbiter’s Decision dated December 5, 2003 is as follows:

WHEREFORE, judgment is hereby rendered declaring that complainant was illegally dismissed. Respondents are
ordered to reinstate the complainant to her former position without loss of seniority rights and with full backwages
and to pay the complainant the following:

1. Full backwages (basic salary, company benefits, all allowances

as of December 5, 2003 in the amount of ₱572,780.00);

2. 13th Month Pay, Midyear, Christmas and performance bonuses

in the amount of ₱105,300.00;

3. Moral damages of ₱50,000.00;

4. Exemplary damages in the amount of ₱30,000.00;

5. Attorney’s Fees of 10% of the award excluding damages in the

amount of ₱67,808.00.

The total award is in the amount of ₱758,080.00.6

PFIZER appealed to the National Labor Relations Commission (NLRC) but its appeal was denied via the NLRC
Decision7 dated October 20, 2004, which affirmed the Labor Arbiter’s ruling but deleted the award for damages, the
dispositive portion of which is as follows:

WHEREFORE, premises considered, the instant appeal and the motion praying for the deposit in escrow of
complainant’s payroll reinstatement are hereby denied and the Decision of the Labor Arbiter is affirmed with the
modification that the award of moral and exemplary damages is deleted and attorney’s fees shall be based on the
award of 13th month pay pursuant to Article III of the Labor Code.8

PFIZER moved for reconsideration but its motion was denied for lack of merit in a NLRC Resolution9 dated
December 14, 2004.

Undaunted, PFIZER filed with the Court of Appeals a special civil action for the issuance of a writ of certiorari under
Rule 65 of the Rules of Court to annul and set aside the aforementioned NLRC issuances. In a Decision dated
November 23, 2005, the Court of Appeals upheld the validity of respondent’s dismissal from employment, the
dispositive portion of which reads as follows:

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the NLRC dated 20 October 2004 as well
as its Resolution of 14 December 2004 is hereby ANNULED and SET ASIDE. Having found the termination of
Geraldine L. Velasco’s employment in accordance with the two notice rule pursuant to the due process requirement
and with just cause, her complaint for illegal dismissal is hereby DISMISSED.10

Respondent filed a Motion for Reconsideration which the Court of Appeals resolved in the assailed Resolution dated
October 23, 2006 wherein it affirmed the validity of respondent’s dismissal from employment but modified its earlier

Labor II – 1
ruling by directing PFIZER to pay respondent her wages from the date of the Labor Arbiter’s Decision dated
December 5, 2003 up to the Court of Appeals Decision dated November 23, 2005, to wit:

IN VIEW WHEREOF, the dismissal of private respondent Geraldine Velasco is AFFIRMED, but petitioner PFIZER,
INC. is hereby ordered to pay her the wages to which she is entitled to from the time the reinstatement order was
issued until November 23, 2005, the date of promulgation of Our Decision.11

Respondent filed with the Court a petition for review under Rule 45 of the Rules of Civil Procedure, which assailed
the Court of Appeals Decision dated November 23, 2005 and was docketed as G.R. No. 175122. Respondent’s
petition, questioning the Court of Appeals’ dismissal of her complaint, was denied by this Court’s Second Division in
a minute Resolution12 dated December 5, 2007, the pertinent portion of which states:

Considering the allegations, issues and arguments adduced in the petition for review on certiorari, the Court
resolves to DENY the petition for failure to sufficiently show any reversible error in the assailed judgment to warrant
the exercise of this Court’s discretionary appellate jurisdiction, and for raising substantially factual issues.

On the other hand, PFIZER filed the instant petition assailing the aforementioned Court of Appeals Resolutions and
offering for our resolution a single legal issue, to wit:

Whether or not the Court of Appeals committed a serious but reversible error when it ordered Pfizer to pay
Velasco wages from the date of the Labor Arbiter’s decision ordering her reinstatement until November 23,
2005, when the Court of Appeals rendered its decision declaring Velasco’s dismissal valid.13

The petition is without merit.

PFIZER argues that, contrary to the Court of Appeals’ pronouncement in its assailed Decision dated November 23,
2005, the ruling in Roquero v. Philippine Airlines, Inc.14 is not applicable in the case at bar, particularly with regard to
the nature and consequences of an order of reinstatement, to wit:

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate a dismissed
employee entitles him to payment of his salaries effective from the time the employer failed to reinstate him despite
the issuance of a writ of execution. Unless there is a restraining order issued, it is ministerial upon the Labor Arbiter
to implement the order of reinstatement. In the case at bar, no restraining order was granted. Thus, it was
mandatory on PAL to actually reinstate Roquero or reinstate him in the payroll. Having failed to do so, PAL must pay
Roquero the salary he is entitled to, as if he was reinstated, from the time of the decision of the NLRC until the
finality of the decision of the Court.15 (Emphases supplied.)

It is PFIZER’s contention in its Memorandum16 that "there was no unjustified refusal on [its part] to reinstate
[respondent] Velasco during the pendency of the appeal,"17 thus, the pronouncement in Roquero cannot be made to
govern this case. During the pendency of the case with the Court of Appeals and prior to its November 23, 2005
Decision, PFIZER claimed that it had already required respondent to report for work on July 1, 2005. However,
according to PFIZER, it was respondent who refused to return to work when she wrote PFIZER, through counsel,
that she was opting to receive her separation pay and to avail of PFIZER’s early retirement program.

In PFIZER’s view, it should no longer be required to pay wages considering that (1) it had already previously paid an
enormous sum to respondent under the writ of execution issued by the Labor Arbiter; (2) it was allegedly ready to
reinstate respondent as of July 1, 2005 but it was respondent who unjustifiably refused to report for work; (3) it
would purportedly be tantamount to allowing respondent to choose "payroll reinstatement" when by law it was the
employer which had the right to choose between actual and payroll reinstatement; (4) respondent should be
deemed to have "resigned" and therefore not entitled to additional backwages or separation pay; and (5) this Court
should not mechanically apply Roquero but rather should follow the doctrine in Genuino v. National Labor Relations
Commission18 which was supposedly "more in accord with the dictates of fairness and justice."19

We do not agree.

Labor II – 1
At the outset, we note that PFIZER’s previous payment to respondent of the amount of ₱1,963,855.00 (representing
her wages from December 5, 2003, or the date of the Labor Arbiter decision, until May 5, 2005) that was
successfully garnished under the Labor Arbiter’s Writ of Execution dated May 26, 2005 cannot be considered in its
favor. Not only was this sum legally due to respondent under prevailing jurisprudence but also this circumstance
highlighted PFIZER’s unreasonable delay in complying with the reinstatement order of the Labor Arbiter. A perusal
of the records, including PFIZER’s own submissions, confirmed that it only required respondent to report for work on
July 1, 2005, as shown by its Letter20 dated June 27, 2005, which is almost two years from the time the order of
reinstatement was handed down in the Labor Arbiter’s Decision dated December 5, 2003.

As far back as 1997 in the seminal case of Pioneer Texturizing Corporation v. National Labor Relations
Commission,21 the Court held that an award or order of reinstatement is immediately self-executory without the need
for the issuance of a writ of execution in accordance with the third paragraph of Article 22322 of the Labor Code. In
that case, we discussed in length the rationale for that doctrine, to wit:

The provision of Article 223 is clear that an award [by the Labor Arbiter] for reinstatement shall be immediately
executory even pending appeal and the posting of a bond by the employer shall not stay the execution for
reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately
enforceable, even pending appeal. To require the application for and issuance of a writ of execution as prerequisites
for the execution of a reinstatement award would certainly betray and run counter to the very object and intent of
Article 223, i.e., the immediate execution of a reinstatement order. The reason is simple. An application for a writ of
execution and its issuance could be delayed for numerous reasons. A mere continuance or postponement of a
scheduled hearing, for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily delay the
issuance of the writ thereby setting at naught the strict mandate and noble purpose envisioned by Article 223. In
other words, if the requirements of Article 224 [including the issuance of a writ of execution] were to govern, as we
so declared in Maranaw, then the executory nature of a reinstatement order or award contemplated by Article 223
will be unduly circumscribed and rendered ineffectual. In enacting the law, the legislature is presumed to have
ordained a valid and sensible law, one which operates no further than may be necessary to achieve its specific
purpose. Statutes, as a rule, are to be construed in the light of the purpose to be achieved and the evil sought to be
prevented. x x x In introducing a new rule on the reinstatement aspect of a labor decision under Republic Act No.
6715, Congress should not be considered to be indulging in mere semantic exercise. x x x23 (Italics in the original;
emphasis and underscoring supplied.)

In the case at bar, PFIZER did not immediately admit respondent back to work which, according to the law, should
have been done as soon as an order or award of reinstatement is handed down by the Labor Arbiter without need
for the issuance of a writ of execution. Thus, respondent was entitled to the wages paid to her under the
aforementioned writ of execution. At most, PFIZER’s payment of the same can only be deemed partial
compliance/execution of the Court of Appeals Resolution dated October 23, 2006 and would not bar respondent
from being paid her wages from May 6, 2005 to November 23, 2005.

It would also seem that PFIZER waited for the resolution of its appeal to the NLRC and, only after it was ordered by
the Labor Arbiter to pay the amount of ₱1,963,855.00 representing respondent’s full backwages from December 5,
2003 up to May 5, 2005, did PFIZER decide to require respondent to report back to work via the Letter dated June
27, 2005.

PFIZER makes much of respondent’s non-compliance with its return- to-work directive by downplaying the reasons
forwarded by respondent as less than sufficient to justify her purported refusal to be reinstated. In PFIZER’s view,
the return-to-work order it sent to respondent was adequate to satisfy the jurisprudential requisites concerning the
reinstatement of an illegally dismissed employee.

It would be useful to reproduce here the text of PFIZER’s Letter dated June 27, 2005:

Dear Ms. Velasco:

Please be informed that, pursuant to the resolutions dated 20 October 2004 and 14 December 2004 rendered by
the National Labor Relations Commission and the order dated 24 May 2005 issued by Executive Labor Arbiter Vito
C. Bose, you are required to report for work on 1 July 2005, at 9:00 a.m., at Pfizer’s main office at the 23rd Floor,
Ayala Life–FGU Center, 6811 Ayala Avenue, Makati City, Metro Manila.
Labor II – 1
Please report to the undersigned for a briefing on your work assignments and other responsibilities, including the
appropriate relocation benefits.

For your information and compliance.

Very truly yours,

(Sgd.)
Ma. Eden Grace Sagisi

Labor and Employee Relations Manager24

To reiterate, under Article 223 of the Labor Code, an employee entitled to reinstatement "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."

It is established in jurisprudence that reinstatement means restoration to a state or condition from which one had
been removed or separated. The person reinstated assumes the position he had occupied prior to his dismissal.
Reinstatement presupposes that the previous position from which one had been removed still exists, or that there is
an unfilled position which is substantially equivalent or of similar nature as the one previously occupied by the
employee.25

Applying the foregoing principle to the case before us, it cannot be said that with PFIZER’s June 27, 2005 Letter, in
belated fulfillment of the Labor Arbiter’s reinstatement order, it had shown a clear intent to reinstate respondent to
her former position under the same terms and conditions nor to a substantially equivalent position. To begin with,
the return-to-work order PFIZER sent respondent is silent with regard to the position or the exact nature of
employment that it wanted respondent to take up as of July 1, 2005. Even if we assume that the job awaiting
respondent in the new location is of the same designation and pay category as what she had before, it is plain from
the text of PFIZER’s June 27, 2005 letter that such reinstatement was not "under the same terms and conditions" as
her previous employment, considering that PFIZER ordered respondent to report to its main office in Makati City
while knowing fully well that respondent’s previous job had her stationed in Baguio City (respondent’s place of
residence) and it was still necessary for respondent to be briefed regarding her work assignments and
responsibilities, including her relocation benefits.

The Court is cognizant of the prerogative of management to transfer an employee from one office to another within
the business establishment, provided that there is no demotion in rank or diminution of his salary, benefits and other
privileges and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment
or demotion without sufficient cause.26 Likewise, the management prerogative to transfer personnel must be
exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair play. There
must be no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.27

The June 27, 2005 return-to-work directive implying that respondent was being relocated to PFIZER’s Makati main
office would necessarily cause hardship to respondent, a married woman with a family to support residing in Baguio
City. However, PFIZER, as the employer, offered no reason or justification for the relocation such as the filling up of
respondent’s former position and the unavailability of substantially equivalent position in Baguio City. A transfer of
work assignment without any justification therefor, even if respondent would be presumably doing the same job with
the same pay, cannot be deemed faithful compliance with the reinstatement order. In other words, in this instance,
there was no real, bona fide reinstatement to speak of prior to the reversal by the Court of Appeals of the finding of
illegal dismissal.

In view of PFIZER’s failure to effect respondent's actual or payroll reinstatement, it is indubitable that
the Roquero ruling is applicable to the case at bar. The circumstance that respondent opted for separation pay in
lieu of reinstatement as manifested in her counsel’s Letter28 dated July 18, 2005 is of no moment. We do not see
respondent’s letter as taking away the option from management to effect actual or payroll reinstatement but, rather
under the factual milieu of this case, where the employer failed to categorically reinstate the employee to her former
or equivalent position under the same terms, respondent was not obliged to comply with PFIZER’s ambivalent

Labor II – 1
return-to-work order. To uphold PFIZER’s view that it was respondent who unjustifiably refused to work when
PFIZER did not reinstate her to her former position, and worse, required her to report for work under conditions
prejudicial to her, is to open the doors to potential employer abuse. Foreseeably, an employer may circumvent the
immediately enforceable reinstatement order of the Labor Arbiter by crafting return-to-work directives that are
ambiguous or meant to be rejected by the employee and then disclaim liability for backwages due to non-
reinstatement by capitalizing on the employee’s purported refusal to work. In sum, the option of the employer to
effect actual or payroll reinstatement must be exercised in good faith.

Moreover, while the Court has upheld the employer’s right to choose between actually reinstating an employee or
merely reinstating him in the payroll, we have also in the past recognized that reinstatement might no longer be
possible under certain circumstances. In F.F. Marine Corporation v. National Labor Relations Commission,29 we had
the occasion to state:

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 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.30 (Emphasis supplied.)

Similarly, we have previously held that an employee’s demand for separation pay may be indicative of strained
relations that may justify payment of separation pay in lieu of reinstatement.31 This is not to say, however, that
respondent is entitled to separation pay in addition to backwages. We stress here that a finding of strained relations
must nonetheless still be supported by substantial evidence.32

In the case at bar, respondent’s decision to claim separation pay over reinstatement had no legal effect, not only
because there was no genuine compliance by the employer to the reinstatement order but also because the
employer chose not to act on said claim. If it was PFIZER’s position that respondent’s act amounted to a
"resignation" it should have informed respondent that it was accepting her resignation and that in view thereof she
was not entitled to separation pay. PFIZER did not respond to respondent’s demand at all. As it was, PFIZER’s
failure to effect reinstatement and accept respondent’s offer to terminate her employment relationship with the
company meant that, prior to the Court of Appeals’ reversal in the November 23, 2005 Decision, PFIZER’s liability
for backwages continued to accrue for the period not covered by the writ of execution dated May 24, 2005 until
November 23, 2005.

Lastly, PFIZER exhorts the Court to re-examine the application of Roquero with a view that a mechanical
application of the same would cause injustice since, in the present case, respondent was able to gain pecuniary
benefit notwithstanding the circumstance of reversal by the Court of Appeals of the rulings of the Labor Arbiter and
the NLRC thereby allowing respondent to profit from the dishonesty she committed against PFIZER which was the
basis for her termination. In its stead, PFIZER proposes that the Court apply the ruling in Genuino v. National Labor
Relations Commission33 which it believes to be more in accord with the dictates of fairness and justice. In that case,
we canceled the award of salaries from the date of the decision of the Labor Arbiter awarding reinstatement in light
of our subsequent ruling finding that the dismissal is for a legal and valid ground, to wit:

Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank "to pay the salaries due to the
complainant from the date it reinstated complainant in the payroll (computed at ₱60,000.00 a month, as found by
the Labor Arbiter) up to and until the date of this decision," the Court hereby cancels said award in view of its finding
that the dismissal of Genuino is for a legal and valid ground.

Ordinarily, the employer is required to reinstate the employee during the pendency of the appeal pursuant to Art.
223, paragraph 3 of the Labor Code, which states:

xxxx

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries
Labor II – 1
s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the
dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining
agreement provisions, and company practices. However, if the employee was reinstated to work during the
pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered
without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based
on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3,
1994 NLRC Decision.34 (Emphases supplied.)

Thus, PFIZER implores the Court to annul the award of backwages and separation pay as well as to require
respondent to refund the amount that she was able to collect by way of garnishment from PFIZER as her accrued
salaries.

The contention cannot be given merit since this question has been settled by the Court en banc.

In the recent milestone case of Garcia v. Philippine Airlines, Inc.,35 the Court wrote finis to the stray posture
in Genuino requiring the dismissed employee placed on payroll reinstatement to refund the salaries in case a final
decision upholds the validity of the dismissal. In Garcia, we clarified the principle of reinstatement pending appeal
due to the emergence of differing rulings on the issue, to wit:

On this score, the Court's attention is drawn to seemingly divergent decisions concerning reinstatement pending
appeal or, particularly, the option of payroll reinstatement. On the one hand is the jurisprudential trend as
expounded in a line of cases including Air Philippines Corp. v. Zamora, while on the other is the recent case
of Genuino v. National Labor Relations Commission. At the core of the seeming divergence is the application of
paragraph 3 of Article 223 of the Labor Code x x x.

xxxx

The view as maintained in a number of cases is that:

x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the
part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal
until reversal by the higher court. On the other hand, if the employee has been reinstated during the appeal
period and such reinstatement order is reversed with finality, the employee is not required to reimburse whatever
salary he received for he is entitled to such, more so if he actually rendered services during the period. (Emphasis in
the original; italics and underscoring supplied)

In other words, a dismissed employee whose case was favorably decided by the Labor Arbiter is entitled to receive
wages pending appeal upon reinstatement, which is immediately executory. Unless there is a restraining order, it is
ministerial upon the Labor Arbiter to implement the order of reinstatement and it is mandatory on the employer to
comply therewith.

The opposite view is articulated in Genuino which states:

If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid,
then the employer has the right to require the dismissed employee on payroll reinstatement to refund the
salaries [he] received while the case was pending appeal, or it can be deducted from the accrued benefits that the
dismissed employee was entitled to receive from [his] employer under existing laws, collective bargaining
agreement provisions, and company practices. However, if the employee was reinstated to work during the
pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered
without need of refund.

Considering that Genuino was not reinstated to work or placed on payroll reinstatement, and her dismissal is based
on a just cause, then she is not entitled to be paid the salaries stated in item no. 3 of the fallo of the September 3,
1994 NLRC Decision. (Emphasis, italics and underscoring supplied)
Labor II – 1
It has thus been advanced that there is no point in releasing the wages to petitioners since their dismissal was found
to be valid, and to do so would constitute unjust enrichment.

Prior to Genuino, there had been no known similar case containing a dispositive portion where the employee was
required to refund the salaries received on payroll reinstatement. In fact, in a catena of cases, the Court did not
order the refund of salaries garnished or received by payroll-reinstated employees despite a subsequent reversal of
the reinstatement order.

The dearth of authority supporting Genuino is not difficult to fathom for it would otherwise render inutile the rationale
of reinstatement pending appeal.

xxxx

x x x Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act
is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing
threat or danger to the survival or even the life of the dismissed or separated employee and his family.36

Furthermore, in Garcia, the Court went on to discuss the illogical and unjust effects of the "refund doctrine"
erroneously espoused in Genuino:

Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the
"refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a
dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries
received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable
decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.
1avvphi1

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll
reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll
reinstatement belongs to the employer, even if the employee is able and raring to return to work. Prior to Genuino, it
is unthinkable for one to refuse payroll reinstatement. In the face of the grim possibilities, the rise of concerned
employees declining payroll reinstatement is on the horizon.

Further, the Genuino ruling not only disregards the social justice principles behind the rule, but also institutes a
scheme unduly favorable to management. Under such scheme, the salaries dispensed pendente lite merely serve
as a bond posted in installment by the employer. For in the event of a reversal of the Labor Arbiter's decision
ordering reinstatement, the employer gets back the same amount without having to spend ordinarily for bond
premiums. This circumvents, if not directly contradicts, the proscription that the "posting of a bond [even a cash
bond] by the employer shall not stay the execution for reinstatement."

In playing down the stray posture in Genuino requiring the dismissed employee on payroll reinstatement to refund
the salaries in case a final decision upholds the validity of the dismissal, the Court realigns the proper course of the
prevailing doctrine on reinstatement pending appeal vis-à-vis the effect of a reversal on appeal.

xxxx

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is
reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the higher court. x x x.37 (Emphasis
supplied.)

In sum, the Court reiterates the principle that reinstatement pending appeal necessitates that it must be immediately
self-executory without need for a writ of execution during the pendency of the appeal, if the law is to serve its noble
purpose, and any attempt on the part of the employer to evade or delay its execution should not be allowed.
Furthermore, we likewise restate our ruling that an order for reinstatement entitles an employee to receive his
accrued backwages from the moment the reinstatement order was issued up to the date when the same was
Labor II – 1
reversed by a higher court without fear of refunding what he had received. It cannot be denied that, under our
statutory and jurisprudential framework, respondent is entitled to payment of her wages for the period after
December 5, 2003 until the Court of Appeals Decision dated November 23, 2005, notwithstanding the finding
therein that her dismissal was legal and for just cause. Thus, the payment of such wages cannot be deemed as
unjust enrichment on respondent’s part.

WHEREFORE, the petition is DENIED and the assailed Resolution dated October 23, 2006 as well as the
Resolution dated April 10, 2007 both issued by the Court of Appeals in CA-G.R. SP No. 88987 are hereby
AFFIRMED.

Labor II – 1
 93.) [G.R. No. 175251, May 30 : 2011]

RODOLFO LUNA, PETITIONER, VS. ALLADO CONSTRUCTION CO., INC., AND/OR RAMON
ALLADO, RESPONDENTS.

DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure seeking
to reverse and set aside the Decision[1] dated July 28, 2006 of the Court of Appeals as well as its
Resolution[2] dated September 28, 2006 denying the motion for reconsideration filed by petitioner.

As narrated in the Court of Appeals' July 28, 2006 Decision, the facts of this case are as follows:

[Respondent] Allado Construction Co., Inc. is a juridical entity engaged in the construction business;
[respondent] Ramon Allado is the President of the said corporation.

[Petitioner] filed a complaint before the Executive Labor Arbiter Arturo Gamolo, RAB Branch XI,
Davao City, alleging that he was an employee of herein [respondents], having been a part of
[respondents'] construction pool of personnel. He had continuously rendered services as a
warehouseman and a timekeeper in every construction project undertaken by [respondents].
Sometime in the afternoon of November 24, 2001, while at [respondents'] construction site in
Maasim, Sarangani Province, he was given a travel order dated November 24, 2001 to proceed to
[respondents'] main office in Davao City for reassignment. Upon arrival at the office of [respondents]
on November 26, 2001, he was told by one Marilou Matilano, personnel manager of [respondents], to
sign several sets of "Contract of Project Employment". He refused to sign the said contracts. Because
of his refusal, he was not given a reassignment or any other work. These incidents prompted him to
file the complaint.

[Respondents], on the other hand, alleged that on November 29, 2001, [petitioner] applied for a
leave of absence until December 6, 2001, which was granted. Upon expiration of his leave,
[petitioner] was advised to report to the company's project in Kablacan, Sarangani Province.
However, he refused to report to his new assignment and claimed instead that he had been
dismissed illegally.[3]

Finding that petitioner should be deemed to have resigned,[4] the Labor Arbiter dismissed petitioner's
complaint for illegal dismissal against respondents, but ordered the latter to pay the former the
amount of P18,000.00 by way of financial assistance.  The dispositive portion of the Decision[5] dated
June 26, 2002 of the Labor Arbiter is as follows:

WHEREFORE, foregoing considered, judgment is hereby rendered dismissing the action for illegal
dismissal but ordering respondent ALLADO CONSTRUCTION CO., INC. to extend complainant
RODOLFO LUNA the amount of PESOS: EIGHTEEN THOUSAND PESOS (P18,000.00) by way of
financial assistance to tide him over during his post-employment with the former.[6]

Only respondents interposed an appeal with the National Labor Relations Commission (NLRC), purely
for the purpose of questioning the validity of the grant of financial assistance made by the Labor
Arbiter.

In its Resolution[7] dated May 9, 2003, the NLRC reversed the June 26, 2002 Decision of the Labor
Arbiter and declared respondents guilty of illegal dismissal and ordered them to pay petitioner one-
month salary for every year of service as separation pay, computed at P170.00 per day and full
backwages from November 21, 2001 up to the finality of the decision.  The dispositive portion of the
May 9, 2003 NLRC Resolution reads:
Labor II – 1
WHEREFORE, the appeal is Granted and the assailed Decision is reversed and vacated; A new
judgment is rendered declaring respondents-appellant guilty of illegal dismissal and to pay
complainant-appellant one (1) month salary for every year of service as separation pay, computed at
P170.00 per day and full backwages from November 21, 2001 up to the finality of the decision.[8]

Respondents moved for reconsideration but their motion was denied in the NLRC Resolution[9] dated
September 30, 2003 due to lack of merit.

Unperturbed, respondents elevated their cause to the Court of Appeals via a petition

for certiorari under Rule 65 of the Rules of Court to set aside the aforementioned NLRC issuances and
to reinstate the Labor Arbiter's decision with the modification that the award of financial assistance
be deleted.  In its Decision dated July 28, 2006, the Court of Appeals granted respondents' petition
for certiorari and disposed of the case in this wise:

ACCORDINGLY, the assailed Orders of respondent Commission are hereby SET ASIDE. The Decision
of the Labor Arbiter in NLRC Case No. RAB XI-12-01312-01 is hereby REINSTATED with the
MODIFICATION that the award of financial assistance is deleted.[10]

Relying on jurisprudence, the Court of Appeals held that it was grave abuse of discretion for the
NLRC to rule on the issue of illegal dismissal when the only issue raised to it on appeal was the
propriety of the award of financial assistance. The Court of Appeals further ruled that financial
assistance may not be awarded in cases of voluntary resignation.

Expectedly, petitioner filed a motion for reconsideration but this was denied by the Court of Appeals
in its Resolution dated September 28, 2006.

Hence, this petition for review wherein the petitioner puts forward for resolution the following issues:

(A) WHETHER OR NOT THE NLRC, IN THE EXERCISE OF ITS INHERENT POWERS, COULD STILL
REVIEW ISSUES NOT BROUGHT DURING THE APPEAL;

(B) WHETHER OR NOT RESPONDENT COURT OF APPEALS EXERCISED GRAVE ABUSE OF DISCRETION
IN DISREGARDING (1) THE FINDINGS OF FACT OF THE NLRC; (2) THE PRINCIPLE OF SOCIAL
JUSTICE; AND (3) EXISTING JURISPRUDENCE WITH RESPECT TO AWARD OF FINANCIAL
ASSISTANCE; and

(C) WHETHER OR NOT RESPONDENT COURT OF APPEALS EXHIBITED BIAS AND PARTIALITY WHEN
IT RENDERED THE SUBJECT DECISION AND RESOLUTION CONSIDERING THE HASTY AND
IMPROVIDENT ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION TO FRUSTRATE PETITIONER IN
IMPLEMENTING THE FINAL AND EXECUTORY JUDGMENT OF THE NLRC RENDERED IN FAVOR OF
PETITIONER.[11]

Anent the first issue, petitioner argues that the NLRC has the authority to review issues not brought
before it for appeal. Petitioner bases this argument on Article 218(c) of the Labor Code, which
provides:

ART. 218. Powers of the Commission. - The Commission shall have the power and authority:

xxxx

(c)   To conduct investigation for the determination of a question, matter or controversy within its
jurisdiction, proceed to hear and determine the disputes in the absence of any party thereto who has
been summoned or served with notice to appear, conduct its proceedings or any part thereof in
public or in private, adjourn its hearings to any time and place, refer technical matters or accounts to
an expert and to accept his report as evidence after hearing of the parties upon due notice, direct

Labor II – 1
parties to be joined in or excluded from the proceedings, correct, amend, or waive any error,
defect or irregularity whether in substance or in form, give all such directions as it may deem
necessary or expedient in the determination of the dispute before it, and dismiss any matter or
refrain from further hearing or from determining the dispute or part thereof, where it is trivial or
where further proceedings by the Commission are not necessary or desirable. (Emphasis supplied.)

Furthermore, petitioner attempts to reinforce his position by citing New Pacific Timber & Supply
Company, Inc. v. National Labor Relations Commission,[12]  where the Court expounded on the powers
of the NLRC as provided for by Article 218(c) of the Labor Code, to wit:

Moreover, under Article 218(c) of the Labor Code, the NLRC may, in the exercise of its appellate
powers, "correct, amend or waive any error, defect or irregularity whether in substance or
in form." Further, Article 221 of the same provides that: "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. x x x."[13] (Emphasis supplied.)

We find petitioner's argument to be untenable.

Section 4(c), Rule VI of the 2002 Rules of Procedure of the NLRC, which was in effect at the time
respondents appealed the Labor Arbiter's decision, expressly provided that, on appeal, the NLRC shall
limit itself only to the specific issues that were elevated for review, to wit:

RULE VI
Appeals

Section 4. Requisites for Perfection of Appeal. x x x.

xxxx

(c) Subject to the provisions of Article 218, once the appeal is perfected in accordance with these
Rules, the Commission shall limit itself to reviewing and deciding specific issues that were
elevated on appeal. (Emphasis supplied.)

As a testament to its effectivity and the NLRC's continued implementation of this procedural policy,
the same provision was retained as Section 4(d), Rule VI of the 2005 Revised Rules of Procedure of
the NLRC.

In the case at bar, the NLRC evidently went against its own rules of procedure when it passed upon
the issue of illegal dismissal although the question raised by respondents in their appeal was
concerned solely with the legality of the labor arbiter's award of financial assistance despite the
finding that petitioner was lawfully terminated.

To reiterate, the clear import of the aforementioned procedural rule is that the NLRC shall, in cases of
perfected appeals, limit itself to reviewing those issues which are raised on appeal.  As a
consequence thereof, any other issues which were not included in the appeal shall become final and
executory.

We are cognizant of the fact that Article 218(c) of the Labor Code grants the NLRC the authority to
"correct, amend or waive any error, defect or irregularity whether in substance or in form" in the
exercise of its appellate jurisdiction.  However, a careful perusal of the body of jurisprudence wherein
we upheld the validity of the NLRC's invocation of that prerogative would reveal that the said cases
involved factual issues and circumstances materially dissimilar to the case at bar.
Labor II – 1
In New Pacific Timber,[14] which petitioner cited, we ruled that there was no grave abuse of discretion
on the part of the NLRC, using Article 218(c) as part basis, when it entertained the petition for relief
filed by a party and treated it as an appeal, even if it was filed beyond the reglementary period for
filing an appeal. Before that case, we invoked the same Labor Code provision in City Fair Corporation
v. National Labor Relations Commission[15] and Judy Philippines, Inc. v. National Labor Relations
Commission[16] to justify our ruling that the NLRC did not abuse its discretion when it allowed in both
cases the appeal of a party even if it was filed a day, or even a few days, late.  Similarly, we held
in Industrial Timber Corporation v. Ababon,[17]  that substantial justice is best served by permitting
the NLRC to allow a petition for relief filed by a party despite the earlier commission of a procedural
defect of filing the motion for reconsideration three days late on the strength of Article 218(c) and
other pertinent labor law provisions.  In Pison-Arceo Agricultural and Development Corporation v.
National Labor Relations Commission,[18] we held that procedural rules governing service of summons
are not strictly construed in NLRC proceedings owing to the relaxation of technical rules of procedure
in labor cases as well as to Article 218(c).  We likewise held in Aguanza v. Asian Terminal, Inc.,
[19]
 that the insufficiency of a supersedeas bond is a defect in form which the NLRC may waive. 
Furthermore, in Independent Sagay-Escalante Planters, Inc. v. National Labor Relations Commission,
[20]
 we ruled that the NLRC had ample authority, under Article 218(c), to disregard the circumstance
that the appeal fee had been tardily paid by one party and to order both parties to present evidence
before the Labor Arbiter in support of their claims.  Lastly, in Faeldonia v. Tong Yak
Groceries[21] and Mt. Carmel College v. Resuena,[22] we used Article 218(c) to justify the NLRC's
reversal of the Labor Arbiter's factual conclusions.  However, in both cases, there was no objection
that the NLRC passed upon issues that were not raised on appeal.

On the other hand, it is already settled in jurisprudence that the NLRC may not rely on Article 218(c)
of the Labor Code as basis for its act of reviewing an entire case above and beyond the sole legal
question raised.  In Del Monte Philippines, Inc. v. National Labor Relations Commission,[23]  which was
correctly pointed out by the Court of Appeals as a case that is on all fours with the case at bar, we
held that the NLRC cannot, under the pretext of correcting serious errors of the Labor Arbiter in the
interest of justice, expand its power of review beyond the issues elevated by an appellant, to wit:

The issue presented for adjudication in this petition is whether or not there was grave abuse of
discretion on the part of the NLRC in reversing the labor arbiter's decision.

We rule in the affirmative.

An appeal from a decision, award or order of the labor arbiter must be brought to the NLRC within
ten (10) calendar days from receipt of such decision, award or order, otherwise, the same becomes
final and executory [Art. 223, Labor Code; Rule VIII, Sec. 1(a), Revised Rules of the NLRC].
Moreover, the rules of the NLRC expressly provide that on appeal, the Commission shall limit
itself only to the specific issues that were elevated for review, all other matters being final and
executory [Rule VIII, Sec. 5(c), Revised Rules of the NLRC, italics supplied].

In the present case, petitioner, aggrieved by the labor arbiter's decision ordering the extension of
financial assistance to Galagar despite the finding that his termination was for just cause, specifically
limited his appeal to a single legal question, i.e., the validity of the award of financial assistance to an
employee dismissed for pilfering company property. On the other hand, private respondent
did not  appeal.

When petitioner limited the issue on appeal, necessarily the NLRC may review only that
issue raised. All other matters, including the issue of the validity of private respondent's
dismissal, are final. If private respondent wanted to challenge the finding of a valid
dismissal, he should have appealed his case seasonably to the NLRC. By raising new issues
in the reply to appeal, private respondent is in effect appealing his case although he has,
in fact, allowed his case to become final by not appealing within the reglementary
Labor II – 1
period. A reply/opposition to appeal cannot take the place of an appeal. Therefore, in this case, the
dismissal of the complaint for illegal dismissal and the denial of the prayer for reinstatement, having
become final, can no longer be reviewed.

Justifying its right to review the entire case and not just the sole legal question raised, public
respondent relied on Article 218 (c) of the Labor Code. In the resolution denying the motion for
reconsideration, public respondent quoted that portion which provides that the NLRC may in the
exercise of its appellate power "correct, amend or waive any error, defect or irregularity whether in
substance or in form."

Such reliance is misplaced.

The Labor Code provision, read in its entirety, states that the NLRC's power to correct
errors, whether substantial or formal, may be exercised only in the determination of a
question, matter or controversy within its jurisdiction [Art. 218, Labor Code]. Therefore, by
considering the arguments and issues in the reply/opposition to appeal which were not properly
raised by timely appeal nor comprehended within the scope of the issue raised in petitioner's appeal,
public respondent committed grave abuse of discretion amounting to excess of jurisdiction.

The contention that the NLRC may nevertheless look into other issues although not raised on appeal
since it is not bound by technical rules of procedure, is likewise devoid of merit.

The law does not provide that the NLRC is totally free from "technical rules of procedure",
but only that the rules of evidence prevailing in courts of law or equity shall not be
controlling in proceedings before the NLRC [Art. 221, Labor Code]. This is hardly license
for the NLRC to disregard and violate the implementing rules it has itself
promulgated. Having done so, the NLRC committed grave abuse of discretion.[24] (Emphases
supplied.)

The Court reiterated the foregoing ruling in Torres v. National Labor Relations
Commission[25] and United Placement International v. National Labor Relations Commission.[26]

With regard to the second assignment of error which essentially involves the determination of factual
issues, we are reminded that, in a petition under Rule 45 of the Rules of Court, only questions of law,
not of fact, may be raised before the Court.[27]  However, where the findings of the NLRC contradict
those of the Labor Arbiter, the Court, in the exercise of equity jurisdiction, may look into the records
of the case and reexamine the questioned findings.[28]

In the case at bar, we are constrained to reexamine the factual findings of the Labor Arbiter and the
Court of Appeals, on one side, and of the NLRC, on the other, since they have divergent
appreciations of the facts of this case.

Petitioner argues that the NLRC had established that there existed serious doubt between the
evidence presented by the parties and, thus, the NLRC was correct in resolving the doubt in
petitioner's favor following jurisprudence which states that if doubt exists between the evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of the
latter.[29]

The argument is unmeritorious.

This is not a case where there is mere doubt between the evidence of the parties; but the question
here is, whether in the first place, there was substantial evidence for petitioner's claim in his
complaint that he was actually dismissed from the service of respondents on November 26, 2001 (as
alleged in his Complaint) or November 27, 2001 (as alleged in his Position Paper) when he
purportedly refused to sign on November 26, 2001 blank project employment contracts.
Labor II – 1
It was incorrect for the NLRC to conclude that doubt exists between the evidence of both parties,
thus, necessitating a ruling in favor of petitioner, because a careful examination of the records of this
case would reveal that there was no adequate evidentiary support for petitioner's purported cause of
action -- actual illegal dismissal.

As shown by the records, inconsistent with his claim that he was actually dismissed on November 26
or 27, 2001, petitioner applied for and was granted a week long leave from November 29 to
December 6, 2001. Petitioner did not deny that he indeed filed and signed the leave application form
submitted by respondents as an attachment to their position paper. He merely claimed that he went
on leave since he was not given any work assignment by the Company. However, the leave
application form which bore his signature clearly stated that his reason for going on leave was "to
settle [his] personal problem."[30]

Indeed, the NLRC gravely abused its discretion in reversing the Labor Arbiter's decision on mere
conjectures and insubstantial grounds.  In its Resolution dated May 9, 2003, the NLRC concluded that
petitioner "was not allowed to work in his former position because he was already replaced"[31] merely
on the basis of the handwritten notation that stated "Who will replace him?"[32] found on the Leave
Application Form which petitioner himself filled-up and signed.  The same notation could reasonably
be interpreted as asking who will be substituting petitioner for the duration of his leave.  It was
speculative at best for the NLRC, in resolving respondents' motion for reconsideration, to rule that
the notation meant permanent replacement simply because the words "in the meantime" were
lacking.[33]  Contrary to the NLRC's interpretation of this notation, it, in fact, belied petitioner's
contention that he was already dismissed or had no existing work assignment for, if so, there would
be no need for him to file a leave application and for the employer to find someone to replace him. 
In any event, such notation cannot be credibly construed as substantial proof of petitioner's alleged
illegal dismissal.

The NLRC further erroneously concluded that petitioner was illegally dismissed since during the
several mandatory conferences between the parties, respondents purportedly never asked petitioner
to go back to work without signing the alleged blank project employment contracts.  From that
circumstance, the NLRC inferred that respondents were no longer in need of petitioner's services. 
This rationalization is difficult to accept because it goes against the pronouncement of the Labor
Arbiter in his Decision dated June 26, 2002. The Labor Arbiter who presided during the mandatory
preliminary conferences plainly stated in his Decision that respondent corporation, through its
representative during preliminary conference, denied the contract of project employment and
confirmed the availability of the same employment to petitioner without any demotion in rank or
diminution of benefits.[34]  Thus, the Labor Arbiter concluded that "complainant's refusal to resume
employment without valid cause and instead demanded separation pay and backwages is tantamount
to resignation."[35]

To reiterate, petitioner did not appeal from the foregoing findings of the Labor Arbiter and he should
be deemed to have accepted those factual findings. If he had truly felt aggrieved, petitioner himself
would have questioned the Labor Arbiter's findings with the NLRC. Instead of pursuing all legal
remedies to protect his rights, petitioner did not even file any opposition or comment to respondents'
Appeal Memorandum with the NLRC.  He only participated in the proceedings again when the NLRC
had already rendered a decision in his favor and he opposed respondents' motion for reconsideration
of the NLRC decision.

In petitioner's Reply and Memorandum filed with this Court, petitioner's counsel belatedly offered the
explanation that the appeal of the Labor Arbiter's decision was not filed for he failed to contact his
client in time.[36]  We find that we cannot give credence to this excuse.  On record is a registry return
card that showed that petitioner received his copy of the Labor Arbiter's decision by mail on July 19,
2002 even before his counsel did on August 1, 2002.  It is difficult to believe that petitioner, after
receiving the Labor Arbiter's decision, would not himself contact his lawyer regarding the same. 
Labor II – 1
Verily, it is settled in jurisprudence that a party that did not appeal a judgment is bound by the same
and he cannot obtain from the appellate court any affirmative relief other than those granted, if any,
in the decision of the lower court or administrative body.[37]

Also in connection with the second issue, petitioner argued in his Memorandum that, assuming
without admitting that there was no illegal dismissal, the award of financial assistance was in
accordance with existing jurisprudence pursuant to the principle of social justice.  On this point, we
agree with petitioner.  Eastern Shipping Lines, Inc v. Sedan[38]  bears certain parallelisms with the
present controversy.  In Eastern, the employer likewise questioned the grant of financial assistance
on the ground that the employee's refusal to report back to work, despite being duly notified of the
need for his service, is tantamount to voluntary resignation.  In that case, however, we ruled:

We are not unmindful of the rule that financial assistance is allowed only in instances where the
employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character. Neither are we unmindful of this Court's pronouncements in Arc-Men Food
Industries Corporation v. NLRC, and Lemery Savings and Loan Bank v. NLRC, where the Court ruled
that when there is no dismissal to speak of, an award of financial assistance is not in order.

But we must stress that this Court did allow, in several instances, the grant of financial assistance. In
the words of Justice Sabino de Leon, Jr., now deceased, financial assistance may be allowed as a
measure of social justice and exceptional circumstances, and as an equitable
concession. The instant case equally calls for balancing the interests of the employer with
those of the worker, if only to approximate what Justice Laurel calls justice in its secular
sense. [39] (Emphases supplied.)

There appears to be no reason why petitioner, who has served respondent corporation for more than
eight years without committing any infraction, cannot be extended the reasonable financial
assistance of P18,000.00 as awarded by the Labor Arbiter on equity considerations.

We see no merit in respondents' contention that petitioner was guilty of insubordination or

abandonment.  Significantly, the Labor Arbiter made no finding that petitioner was guilty of
insubordination or abandonment.  It would appear that a few days after the expiration of his applied
for leave, petitioner filed his complaint for illegal actual dismissal.  Other than their self-serving
allegations, respondents offered no proof that upon the expiration of petitioner's leave they directed
petitioner to report to work but petitioner willfully failed to comply with said directive. On the
contrary, in their own position paper, respondents prayed, aside from the dismissal of the complaint,
that petitioner be directed by the Labor Arbiter to return to work and only when petitioner fails to
comply with such order did they pray that petitioner be considered to have abandoned his work.[40] 
The Labor Arbiter did not grant this particular relief prayed for by respondents but instead awarded
financial assistance to petitioner.

In some cases where there is neither a dismissal nor abandonment, we have previously held that
separation pay may be awarded under appropriate circumstances.  Thus, in Indophil Acrylic Mfg.
Corp. v. National Labor Relations Commission,[41] wherein the employer claimed that the employee
had resigned/abandoned his work while the employee believed that he had been terminated, the
Court held:

We have turned a heedful eye on all the pleadings and evidence submitted by the parties and have
concluded that there was NO DISMISSAL. Setting aside the other arguments of the parties which we
find irrelevant, attention is called to the letter dated October 2, 1989 of petitioner's Personnel
Manager, Mr. Nicasio B. Gaviola, to private respondent which the latter does not dispute, the full text
of which reads:

"Records show that you have not been reporting to (sic) work since September 16, 1989 up to this
writing. For what reason, we are not aware.

Labor II – 1
With this letter, you are required to report to this office and explain your unauthorized absences
within three (3) days upon receipt hereof.

Failure to report as required shall mean that we will consider you having resigned for abandonment
of job." (sic)

Clearly, therefore, petitioner had disregarded private respondent's previous resignation and still
considers him its employee. It follows, that at the time private respondent filed his complaint
for illegal dismissal before the Labor Arbiter, on October 4, 1989, petitioner has not dismissed
him.

xxxx

There being no dismissal of private respondent by petitioner to speak of, the status

quo between them should be maintained as a matter of course. But there is no denying that
their relationship must have been ruptured. Taking into account the misconception of private
respondent that he was dismissed and the October 2, 1989 letter of petitioner, the parties could have
easily settled their controversy at the inception of the proceedings before the Labor Arbiter. This they
failed to do. Thus, in lieu of reinstatement, petitioner is ordered to grant separation pay to private
respondent. x x x.[42] (Emphases supplied.)

Applying the above ratiocination by analogy and in accordance with equity, we uphold the Labor
Arbiter's award of financial assistance as proper in this case.

Lastly, with regard to the third issue, petitioner argues that the former Special Twenty-Second
Division of the Court of Appeals exhibited its bias and partiality when it issued a temporary
restraining order (TRO) to stop and frustrate the enforcement of the decision rendered by the NLRC
despite the fact that only one of its member associate justices granted the same without the
concurrence of the two other member associate justices who merely concurred subsequently.

The argument is without merit.

In fact, the issue is hardly contentious. The granting of a TRO by a justice of the Court of Appeals
who is the ponente of the case, even without the concurrence of the other associate justices assigned
in the division, is allowed under Section 5, Rule VI of the 2002 Internal Rules of the Court of Appeals,
to wit:

Section 5. Action by a Justice. - All members of the Division shall act upon an application for a
temporary restraining order and writ of preliminary injunction. However, if the matter is of extreme
urgency, and a Justice is absent, the two other justices shall act upon the application. If only
the ponente is present, then he shall act alone upon the application. The action of the two
Justices or of the ponente shall however be submitted on the next working day to the absent
member or members of the Division for ratification, modification or recall. (Emphases
supplied.)

The records of this case would attest to the urgency of the situation which necessitated the
exceptionally prompt issuance of the TRO at issue. When the TRO was issued, the NLRC Regional
Arbitration Branch No. XI was already in the process of enforcing the assailed Resolution of the NLRC
dated May 9, 2003 as evidenced by its issuance of a Notice of Hearing[43] for a pre-execution
conference which was impelled by a motion made by petitioner.[44]  The pre-execution conference was
conducted as scheduled, thus, respondents filed with the Court of Appeals an Urgent Motion for the
Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction.[45]

In view of the urgency of the situation and in order to prevent the petition of respondents from
Labor II – 1
becoming moot and academic, Court of Appeals Associate Justice Romulo V. Borja, the Chairman of
the Twenty-Second Division, issued a Resolution dated June 14, 2006, granting the TRO prayed for
by respondents.[46]  Nonetheless, the grant of said TRO was subsequently concurred in by the rest of
the members of the Division, namely Associate Justices Antonio L. Villamor and Ramon R. Garcia, in
their separate Resolutions both dated June 19, 2006.[47]  Clearly, the issuance of the TRO at issue
was in accordance with the 2002 Internal Rules of the Court of Appeals.

WHEREFORE, the petition is PARTLY GRANTED.  The assailed Decision dated July 28, 2006 as well
as the Resolution dated September 28, 2006 of the Court of Appeals in CA-G.R. SP No. 81703
are AFFIRMED WITH THE MODIFICATION that the award of financial assistance is REINSTATED.
The Labor Arbiter's Decision dated June 26, 2002 is AFFIRMED in toto.

Labor II – 1
 94.) [G.R. No. 169191, June 01 : 2011]

ROMEO VILLARUEL, PETITIONER, VS. YEO HAN GUAN, DOING BUSINESS UNDER THE NAME AND STYLE
YUHANS ENTERPRISES, RESPONDENT.

DECISION

PERALTA, J.:

Assailed in the present petition are the Decision1 and Resolution2 of the Court of Appeals (CA) dated February 16, 2005
and August 2, 2005, respectively, in CA-G.R. SP No. 79105. The CA Decision modified the March 31, 2003 Decision of
the National Labor Relations Commission (NLRC) in NLRC NCR CA 028050-01, while the CA Resolution denied
petitioner's Motion for Reconsideration.

The antecedents of the case are as follows:

On February 15, 1999, herein petitioner filed with the NLRC, National Capital Region, Quezon City a Complaint3 for
payment of separation pay against Yuhans Enterprises.

Subsequently, in his Amended Complaint and Position Paper4 dated December 6, 1999, petitioner alleged that in June
1963, he was employed as a machine operator by Ribonette Manufacturing Company, an enterprise engaged in the
business of manufacturing and selling PVC pipes and is owned and managed by herein respondent Yeo Han Guan.
Over a period of almost twenty (20) years, the company changed its name four times. Starting in 1993 up to the time
of the filing of petitioner's complaint in 1999, the company was operating under the name of Yuhans Enterprises. 
Despite the changes in the company's name, petitioner remained in the employ of respondent. Petitioner further
alleged that on October 5, 1998, he got sick and was confined in a hospital; on December 12, 1998, he reported for
work but was no longer permitted to go back because  of his illness; he asked that respondent allow him to continue
working but be assigned a lighter kind of work but his request was denied; instead, he was offered a sum of
P15,000.00 as his separation pay; however, the said amount corresponds only to the period between 1993 and 1999;
petitioner prayed that he be granted separation pay computed from his first day of employment in June 1963, but
respondent refused. Aside from separation pay, petitioner prayed for the payment of service incentive leave for three
years as well as attorney's fees.

On the other hand, respondent averred in his Position Paper5 that petitioner was hired as machine operator from
March 1, 1993 until he stopped working sometime in February 1999 on the ground that he was suffering from illness;
after his recovery, petitioner was directed to report for work, but he never showed up.  Respondent was later caught
by surprise when petitioner filed the instant case for recovery of separation pay. Respondent claimed that he never
terminated the services of petitioner and that during their mandatory conference, he even told the latter that he could
go back to work anytime but petitioner clearly manifested that he was no longer interested in returning to work and
instead asked for separation pay.

On November 27, 2000, the Labor Arbiter handling the case rendered judgment in favor of petitioner. The dispositive
portion of the Labor Arbiter's Decision reads, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant and against herein
respondent, as follows:

1. Ordering the respondents to pay separation benefits equivalent to one-half (½) month salary per year of service, a
fraction of six months equivalent to one year to herein complainant based on the complainant's length of service
reckoned from June 1963 up to October 1998 as provided under Article 284 of the Labor Code, the same computed by
the Computation and Examination Unit which we hereby adopt and approved (sic) as our own in the amount of
NINETY-ONE THOUSAND FOUR HUNDRED FORTY-FIVE PESOS (P91,445.00);

2. Ordering the respondents to pay service incentive leave equivalent to fifteen days' salary in the amount of THREE
THOUSAND FIFTEEN PESOS (P3,015.00).

All other claims are dismissed for lack of merit.

SO ORDERED.6

Aggrieved, respondent filed an appeal with the NLRC.

On March 31, 2003, the Third Division of the NLRC rendered its Decision7 dismissing respondent's appeal and affirming

Labor II – 1
the Labor Arbiter's Decision.

Respondent filed a Motion for Reconsideration,8 but the same was denied by the NLRC in a Resolution9 dated May 30,
2003.

Respondent then filed with the CA a petition for certiorari under Rule 65 of the Rules of Court.

On February 16, 2005, the CA promulgated its presently assailed Decision disposing as follows:

WHEREFORE, premises considered, the petition is partially GRANTED. The award of separation pay is hereby
DELETED, but the Decision insofar as it awards private respondent [herein petitioner] service incentive leave pay of
three thousand and fifteen pesos (P3,015.00) stands. The NLRC is permanently ENJOINED from partially executing its
Decision dated November 27, 2000 insofar as the award of separation pay is concerned; or if it has already effected
execution, it should order the private respondent to forthwith restitute the same.

SO ORDERED.10

Herein petitioner filed his Motion for Reconsideration11 of the CA Decision, but it was denied by the CA via a
Resolution12 dated August 2, 2005.

Hence, the instant petition based on the following assignment of errors:

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FAILURE TO APPRECIATE THE ADMISSION BY
[PETITIONER] OF THE FACT AND VALIDITY OF HIS TERMINATION BY THE [RESPONDENT].

II

[THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED] IN DENYING [PETITIONER'S] ENTITLEMENT TO

SEPARATION PAY UNDER ARTICLE 284 OF THE LABOR CODE AND UNDER THE OMNIBUS RULES IMPLEMENTING THE
LABOR CODE.

III

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE BURDEN OF PROOF THAT AN
EMPLOYEE IS SUFFERING FROM DISEASE THAT HAS TO BE TERMINATED REST[S] UPON THE EMPLOYER IN ORDER
FOR THE EMPLOYEE TO BE ENTITLED TO SEPARATION PAY.

IV

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ORDERING THE DELETION OF THE AWARD OF
SEPARATION PAY TO THE [PETITIONER].13

The Court finds the petition without merit.

The assigned errors in the instant petition essentially boil down to the question of whether petitioner is entitled to
separation pay under the provisions of the Labor Code, particularly Article 284 thereof, which reads as follows:

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 (½)
month salary for every year of service whichever is greater, a fraction of at least six months being considered as one
(1) whole year.

A plain reading of the abovequoted provision clearly presupposes that it is the employer who terminates the services
of the employee 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. It does not contemplate a situation where it is
the employee who severs his or her employment ties. This is precisely the reason why Section 8,14 Rule 1, Book VI of
the Omnibus Rules Implementing the Labor Code, directs that an employer shall not terminate the services of the
employee unless there is a certification by a competent public health authority that the disease is of such nature or at
such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment.

Labor II – 1
Hence, the pivotal question that should be settled in the present case is whether respondent, in fact, dismissed
petitioner from his employment.

A perusal of the Decisions of the Labor Arbiter and the NLRC would show, however, that there was no discussion with
respect to the abovementioned issue. Both lower tribunals merely concluded that petitioner is entitled to separation
pay under Article 284 of the Labor Code without any explanation. The Court finds no convincing justification, in the
Decision of the Labor Arbiter on why petitioner is entitled to such pay. In the same manner, the NLRC Decision did not
give any rationalization as the gist thereof simply consisted of a quoted portion of the appealed Decision of the Labor
Arbiter.

On the other hand, the Court agrees with the CA in its observation of the following circumstances as proof that
respondent did not terminate petitioner's employment:  first, the only cause of action in petitioner's original complaint
is that he was "offered a very low separation pay"; second, there was no allegation of illegal dismissal, both in
petitioner's original and amended complaints and position paper; and, third, there was no prayer for reinstatement.

In consonance with the above findings, the Court finds that petitioner was the one who initiated the severance of his
employment relations with respondent. It is evident from the various pleadings filed by petitioner that he never
intended to return to his employment with respondent on the ground that his health is failing. Indeed, petitioner did
not ask for reinstatement. In fact, he rejected respondent's offer for him to return to work. This is tantamount to
resignation.

Resignation is defined as the voluntary act of an employee who finds himself in a situation where he believes that
personal reasons cannot be sacrificed in favor of the exigency of the service and he has no other choice but to
disassociate himself from his employment.15

It may not be amiss to point out at this juncture that aside from Article 284 of the Labor Code, the award of
separation pay is also authorized in the situations dealt with in Article 28316 of the same Code and under Section 4 (b),
Rule I, Book VI of the Implementing Rules and Regulations of the said Code17 where there is illegal dismissal and
reinstatement is no longer feasible. By way of exception, this Court has allowed grants of separation pay to stand as
"a measure of social justice" where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character.18 However, there is no provision in the Labor Code which grants
separation pay to voluntarily resigning employees. In fact, the rule is that an employee who voluntarily resigns
from employment is not entitled to separation pay, except when it is stipulated in the employment contract or CBA, or
it is sanctioned by established employer practice or policy.19 In the present case, neither the abovementioned
provisions of the Labor Code and its implementing rules and regulations nor the exceptions apply because petitioner
was not dismissed from his employment and there is no evidence to show that payment of separation pay is stipulated
in his employment contract or sanctioned by established practice or policy of herein respondent, his employer.

Since petitioner was not terminated from his employment and, instead, is deemed to have resigned
therefrom, he is not entitled to separation pay under the provisions of the Labor Code.

The foregoing notwithstanding, this Court, in a number of cases, has granted financial assistance to separated
employees as a measure of social and compassionate justice and as an equitable concession. Taking into
consideration the factual circumstances obtaining in the present case, the Court finds that petitioner is entitled to this
kind of assistance.

Citing Eastern Shipping Lines, Inc. v. Sedan,20 this Court, in the more recent case of Eastern Shipping Lines v.
Antonio,21 held:

But we must stress that this Court did allow, in several instances, the grant of financial assistance. In the words of
Justice Sabino de Leon, Jr., now deceased, financial assistance may be allowed as a measure of social justice and
exceptional circumstances, and as an equitable concession. The instant case equally calls for balancing the interests of
the employer with those of the worker, if only to approximate what Justice Laurel calls justice in its secular sense.

In this instance, our attention has been called to the following circumstances: that private respondent joined the
company when he was a young man of 25 years and stayed on until he was 48 years old; that he had given to the
company the best years of his youth, working on board ship for almost 24 years; that in those years there was not a
single report of him transgressing any of the company rules and regulations; that he applied for optional retirement
under the company's non-contributory plan when his daughter died and for his own health reasons; and that it would
appear that he had served the company well, since even the company said that the reason it refused his application
for optional retirement was that it still needed his services; that he denies receiving the telegram asking him to report
back to work; but that considering his age and health, he preferred to stay home rather than risk further working in a
ship at sea.

Labor II – 1
In our view, with these special circumstances, we can call upon the same "social and compassionate justice" cited in
several cases allowing financial assistance. These circumstances indubitably merit equitable concessions, via the
principle of "compassionate justice" for the working class. x x x

In the present case, respondent had been employed with the petitioner for almost twelve (12) years. On February 13,
1996, he suffered from a "fractured left transverse process of fourth lumbar vertebra," while their vessel was at the
port of Yokohama, Japan. After consulting a doctor, he was required to rest for a month. When he was repatriated to
Manila and examined by a company doctor, he was declared fit to continue his work. When he reported for work,
petitioner refused to employ him despite the assurance of its personnel manager. Respondent patiently waited for
more than one year to embark on the vessel as 2nd Engineer, but the position was not given to him, as it was occupied
by another person known to one of the stockholders. Consequently, for having been deprived of continued
employment with petitioner's vessel, respondent opted to apply for optional retirement. In addition, records show that
respondent's seaman's book, as duly noted and signed by the captain of the vessel was marked "Very
Good," and "recommended for hire." Moreover, respondent had no derogatory record on file over his long years of
service with the petitioner.

Considering all of the foregoing and in line with Eastern, the ends of social and compassionate justice would be served
best if respondent will be given some equitable relief. Thus, the award of P100,000.00 to respondent as financial
assistance is deemed equitable under the circumstances.22

While the abovecited cases authorized the grant of financial assistance in lieu of retirement benefits, the Court finds
no cogent reason not to employ the same guiding principle of compassionate justice applied by the Court, taking into
consideration the factual circumstances obtaining in the present case. In this regard, the Court finds credence in
petitioner's contention that he is in the employ of respondent for more than 35 years. In the absence of a substantial
refutation on the part of respondent, the Court agrees with the findings of the Labor Arbiter and the NLRC that
respondent company is not distinct from its predecessors but, in fact, merely continued the operation of the latter
under the same owners and the same business venture. The Court further notes that there is no evidence on record to
show that petitioner has any derogatory record during his long years of service with respondent and that his
employment was severed not by reason of any infraction on his part but because of his failing physical condition. Add
to this the willingness of respondent to give him financial assistance. Hence, based on the foregoing, the Court finds
that the award of P50,000.00 to petitioner as financial assistance is deemed equitable under the circumstances.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals
are AFFIRMED with MODIFICATION by awarding petitioner with financial assistance in the amount of P50,000.00.

Labor II – 1
95.) G.R. No. 189871               August 13, 2013

DARIO NACAR, PETITIONER,
vs.
GALLERY FRAMES AND/OR FELIPE BORDEY, JR., RESPONDENTS.

DECISION

PERALTA, J.:

This is a petition for review on certiorari assailing the Decision1 dated September 23, 2008 of the Court of Appeals
(CA) in CA-G.R. SP No. 98591, and the Resolution2 dated October 9, 2009 denying petitioner’s motion for
reconsideration.

The factual antecedents are undisputed.

Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of the National Labor
Relations Commission (NLRC) against respondents Gallery Frames (GF) and/or Felipe Bordey, Jr., docketed as
NLRC NCR Case No. 01-00519-97.

On October 15, 1998, the Labor Arbiter rendered a Decision3 in favor of petitioner and found that he was dismissed
from employment without a valid or just cause. Thus, petitioner was awarded backwages and separation pay in lieu
of reinstatement in the amount of ₱158,919.92. The dispositive portion of the decision, reads:

With the foregoing, we find and so rule that respondents failed to discharge the burden of showing that complainant
was dismissed from employment for a just or valid cause. All the more, it is clear from the records that complainant
was never afforded due process before he was terminated. As such, we are perforce constrained to grant
complainant’s prayer for the payments of separation pay in lieu of reinstatement to his former position, considering
the strained relationship between the parties, and his apparent reluctance to be reinstated, computed only up to
promulgation of this decision as follows:

SEPARATION PAY

Date Hired = August 1990

Rate = ₱198/day

Date of Decision = Aug. 18, 1998

Length of Service = 8 yrs. & 1 month

₱198.00 x 26 days x 8 months = ₱41,184.00

BACKWAGES

Date Dismissed = January 24, 1997

Rate per day = ₱196.00

Date of Decisions = Aug. 18, 1998

a) 1/24/97 to 2/5/98 = 12.36 mos.

₱196.00/day x 12.36 mos. = ₱62,986.56

b) 2/6/98 to 8/18/98 = 6.4 months

Labor II – 1
 Prevailing Rate per day = ₱62,986.00

₱198.00 x 26 days x 6.4 mos. = ₱32,947.20

TOTAL = ₱95.933.76

xxxx

WHEREFORE, premises considered, judgment is hereby rendered finding respondents guilty of constructive
dismissal and are therefore, ordered:

To pay jointly and severally the complainant the amount of sixty-two thousand nine hundred eighty-six pesos and
56/100 (₱62,986.56) Pesos representing his separation pay;

To pay jointly and severally the complainant the amount of nine (sic) five thousand nine hundred thirty-three and
36/100 (₱95,933.36) representing his backwages; and

All other claims are hereby dismissed for lack of merit.

SO ORDERED.4

Respondents appealed to the NLRC, but it was dismissed for lack of merit in the Resolution5 dated February 29,
2000. Accordingly, the NLRC sustained the decision of the Labor Arbiter. Respondents filed a motion for
reconsideration, but it was denied.6

Dissatisfied, respondents filed a Petition for Review on Certiorari before the CA. On August 24, 2000, the CA issued
a Resolution dismissing the petition. Respondents filed a Motion for Reconsideration, but it was likewise denied in a
Resolution dated May 8, 2001.7

Respondents then sought relief before the Supreme Court, docketed as G.R. No. 151332. Finding no reversible
error on the part of the CA, this Court denied the petition in the Resolution dated April 17, 2002.8

An Entry of Judgment was later issued certifying that the resolution became final and executory on May 27,
2002.9 The case was, thereafter, referred back to the Labor Arbiter. A pre-execution conference was consequently
scheduled, but respondents failed to appear.10

On November 5, 2002, petitioner filed a Motion for Correct Computation, praying that his backwages be computed
from the date of his dismissal on January 24, 1997 up to the finality of the Resolution of the Supreme Court on May
27, 2002.11 Upon recomputation, the Computation and Examination Unit of the NLRC arrived at an updated amount
in the sum of ₱471,320.31.12

On December 2, 2002, a Writ of Execution13 was issued by the Labor Arbiter ordering the Sheriff to collect from
respondents the total amount of ₱471,320.31. Respondents filed a Motion to Quash Writ of Execution, arguing,
among other things, that since the Labor Arbiter awarded separation pay of ₱62,986.56 and limited backwages of
₱95,933.36, no more recomputation is required to be made of the said awards. They claimed that after the decision
becomes final and executory, the same cannot be altered or amended anymore.14 On January 13, 2003, the Labor
Arbiter issued an Order15 denying the motion. Thus, an Alias Writ of Execution16 was issued on January 14, 2003.

Respondents again appealed before the NLRC, which on June 30, 2003 issued a Resolution17 granting the appeal in
favor of the respondents and ordered the recomputation of the judgment award.

On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the NLRC to be final and
executory. Consequently, another pre-execution conference was held, but respondents failed to appear on time.
Meanwhile, petitioner moved that an Alias Writ of Execution be issued to enforce the earlier recomputed judgment
award in the sum of ₱471,320.31.18

Labor II – 1
The records of the case were again forwarded to the Computation and Examination Unit for recomputation, where
the judgment award of petitioner was reassessed to be in the total amount of only ₱147,560.19.

Petitioner then moved that a writ of execution be issued ordering respondents to pay him the original amount as
determined by the Labor Arbiter in his Decision dated October 15, 1998, pending the final computation of his
backwages and separation pay.

On January 14, 2003, the Labor Arbiter issued an Alias Writ of Execution to satisfy the judgment award that was due
to petitioner in the amount of ₱147,560.19, which petitioner eventually received.

Petitioner then filed a Manifestation and Motion praying for the re-computation of the monetary award to include the
appropriate interests.19

On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion, but only up to the amount of ₱11,459.73.
The Labor Arbiter reasoned that it is the October 15, 1998 Decision that should be enforced considering that it was
the one that became final and executory. However, the Labor Arbiter reasoned that since the decision states that
the separation pay and backwages are computed only up to the promulgation of the said decision, it is the amount
of ₱158,919.92 that should be executed. Thus, since petitioner already received ₱147,560.19, he is only entitled to
the balance of ₱11,459.73.

Petitioner then appealed before the NLRC,21 which appeal was denied by the NLRC in its Resolution22 dated
September 27, 2006. Petitioner filed a Motion for Reconsideration, but it was likewise denied in the
Resolution23 dated January 31, 2007.

Aggrieved, petitioner then sought recourse before the CA, docketed as CA-G.R. SP No. 98591.

On September 23, 2008, the CA rendered a Decision24 denying the petition. The CA opined that since petitioner no
longer appealed the October 15, 1998 Decision of the Labor Arbiter, which already became final and executory, a
belated correction thereof is no longer allowed. The CA stated that there is nothing left to be done except to enforce
the said judgment. Consequently, it can no longer be modified in any respect, except to correct clerical errors or
mistakes.

Petitioner filed a Motion for Reconsideration, but it was denied in the Resolution25 dated October 9, 2009.

Hence, the petition assigning the lone error:

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED, COMMITTED GRAVE
ABUSE OF DISCRETION AND DECIDED CONTRARY TO LAW IN UPHOLDING THE QUESTIONED
RESOLUTIONS OF THE NLRC WHICH, IN TURN, SUSTAINED THE MAY 10, 2005 ORDER OF LABOR ARBITER
MAGAT MAKING THE DISPOSITIVE PORTION OF THE OCTOBER 15, 1998 DECISION OF LABOR ARBITER
LUSTRIA SUBSERVIENT TO AN OPINION EXPRESSED IN THE BODY OF THE SAME DECISION.26

Petitioner argues that notwithstanding the fact that there was a computation of backwages in the Labor Arbiter’s
decision, the same is not final until reinstatement is made or until finality of the decision, in case of an award of
separation pay. Petitioner maintains that considering that the October 15, 1998 decision of the Labor Arbiter did not
become final and executory until the April 17, 2002 Resolution of the Supreme Court in G.R. No. 151332 was
entered in the Book of Entries on May 27, 2002, the reckoning point for the computation of the backwages and
separation pay should be on May 27, 2002 and not when the decision of the Labor Arbiter was rendered on October
15, 1998. Further, petitioner posits that he is also entitled to the payment of interest from the finality of the decision
until full payment by the respondents.

On their part, respondents assert that since only separation pay and limited backwages were awarded to petitioner
by the October 15, 1998 decision of the Labor Arbiter, no more recomputation is required to be made of said
awards. Respondents insist that since the decision clearly stated that the separation pay and backwages are
Labor II – 1
"computed only up to [the] promulgation of this decision," and considering that petitioner no longer appealed the
decision, petitioner is only entitled to the award as computed by the Labor Arbiter in the total amount of
₱158,919.92. Respondents added that it was only during the execution proceedings that the petitioner questioned
the award, long after the decision had become final and executory. Respondents contend that to allow the further
recomputation of the backwages to be awarded to petitioner at this point of the proceedings would substantially vary
the decision of the Labor Arbiter as it violates the rule on immutability of judgments.

The petition is meritorious.

The instant case is similar to the case of Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth
Division),27 wherein the issue submitted to the Court for resolution was the propriety of the computation of the
awards made, and whether this violated the principle of immutability of judgment. Like in the present case, it was a
distinct feature of the judgment of the Labor Arbiter in the above-cited case that the decision already provided for
the computation of the payable separation pay and backwages due and did not further order the computation of the
monetary awards up to the time of the finality of the judgment. Also in Session Delights, the dismissed employee
failed to appeal the decision of the labor arbiter. The Court clarified, thus:

In concrete terms, the question is whether a re-computation in the course of execution of the labor arbiter's original
computation of the awards made, pegged as of the time the decision was rendered and confirmed with modification
by a final CA decision, is legally proper. The question is posed, given that the petitioner did not immediately pay the
awards stated in the original labor arbiter's decision; it delayed payment because it continued with the litigation until
final judgment at the CA level.

A source of misunderstanding in implementing the final decision in this case proceeds from the way the original
labor arbiter framed his decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been confirmed with finality. This is
the finding of the illegality of the dismissal and the awards of separation pay in lieu of reinstatement, backwages,
attorney's fees, and legal interests.

The second part is the computation of the awards made. On its face, the computation the labor arbiter made shows
that it was time-bound as can be seen from the figures used in the computation. This part, being merely a
computation of what the first part of the decision established and declared, can, by its nature, be re-computed. This
is the part, too, that the petitioner now posits should no longer be re-computed because the computation is already
in the labor arbiter's decision that the CA had affirmed. The public and private respondents, on the other hand, posit
that a re-computation is necessary because the relief in an illegal dismissal decision goes all the way up to
reinstatement if reinstatement is to be made, or up to the finality of the decision, if separation pay is to be given in
lieu reinstatement.

That the labor arbiter's decision, at the same time that it found that an illegal dismissal had taken place, also made a
computation of the award, is understandable in light of Section 3, Rule VIII of the then NLRC Rules of Procedure
which requires that a computation be made. This Section in part states:

[T]he Labor Arbiter of origin, in cases involving monetary awards and at all events, as far as practicable, shall
embody in any such decision or order the detailed and full amount awarded.

Clearly implied from this original computation is its currency up to the finality of the labor arbiter's decision. As we
noted above, this implication is apparent from the terms of the computation itself, and no question would have
arisen had the parties terminated the case and implemented the decision at that point.

However, the petitioner disagreed with the labor arbiter's findings on all counts - i.e., on the finding of illegality as
well as on all the consequent awards made. Hence, the petitioner appealed the case to the NLRC which, in turn,
affirmed the labor arbiter's decision. By law, the NLRC decision is final, reviewable only by the CA on jurisdictional
grounds.

Labor II – 1
The petitioner appropriately sought to nullify the NLRC decision on jurisdictional grounds through a timely filed Rule
65 petition for certiorari. The CA decision, finding that NLRC exceeded its authority in affirming the payment of 13th
month pay and indemnity, lapsed to finality and was subsequently returned to the labor arbiter of origin for
execution.

It was at this point that the present case arose. Focusing on the core illegal dismissal portion of the original labor
arbiter's decision, the implementing labor arbiter ordered the award re-computed; he apparently read the figures
originally ordered to be paid to be the computation due had the case been terminated and implemented at the labor
arbiter's level. Thus, the labor arbiter re-computed the award to include the separation pay and the backwages due
up to the finality of the CA decision that fully terminated the case on the merits. Unfortunately, the labor arbiter's
approved computation went beyond the finality of the CA decision (July 29, 2003) and included as well the payment
for awards the final CA decision had deleted - specifically, the proportionate 13th month pay and the indemnity
awards. Hence, the CA issued the decision now questioned in the present petition.

We see no error in the CA decision confirming that a re-computation is necessary as it essentially considered the
labor arbiter's original decision in accordance with its basic component parts as we discussed above. To reiterate,
the first part contains the finding of illegality and its monetary consequences; the second part is the computation of
the awards or monetary consequences of the illegal dismissal, computed as of the time of the labor arbiter's original
decision.28

Consequently, from the above disquisitions, under the terms of the decision which is sought to be executed by the
petitioner, no essential change is made by a recomputation as this step is a necessary consequence that flows from
the nature of the illegality of dismissal declared by the Labor Arbiter in that decision.29 A recomputation (or an
original computation, if no previous computation has been made) is a part of the law – specifically, Article 279 of the
Labor Code and the established jurisprudence on this provision – that is read into the decision. By the nature of an
illegal dismissal case, the reliefs continue to add up until full satisfaction, as expressed under Article 279 of the
Labor Code. The recomputation of the consequences of illegal dismissal upon execution of the decision does not
constitute an alteration or amendment of the final decision being implemented. The illegal dismissal ruling stands;
only the computation of monetary consequences of this dismissal is affected, and this is not a violation of the
principle of immutability of final judgments.30

That the amount respondents shall now pay has greatly increased is a consequence that it cannot avoid as it is the
risk that it ran when it continued to seek recourses against the Labor Arbiter's decision. Article 279 provides for the
consequences of illegal dismissal in no uncertain terms, qualified only by jurisprudence in its interpretation of when
separation pay in lieu of reinstatement is allowed. When that happens, the finality of the illegal dismissal decision
becomes the reckoning point instead of the reinstatement that the law decrees. In allowing separation pay, the final
decision effectively declares that the employment relationship ended so that separation pay and backwages are to
be computed up to that point.31

Finally, anent the payment of legal interest. In the landmark case of Eastern Shipping Lines, Inc. v. Court of
Appeals,32 the Court laid down the guidelines regarding the manner of computing legal interest, to wit:

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169,
Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made,
Labor II – 1
 the interest shall begin to run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from
such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.33

Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796 dated May
16, 2013, approved the amendment of Section 234 of Circular No. 905, Series of 1982 and, accordingly, issued
Circular No. 799,35 Series of 2013, effective July 1, 2013, the pertinent portion of which reads:

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the
rate of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905,
Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in
judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.136 of the Manual of Regulations for Banks and Sections
4305Q.1,37 4305S.338 and 4303P.139 of the Manual of Regulations for Non-Bank Financial Institutions are hereby
amended accordingly.

This Circular shall take effect on 1 July 2013.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would govern the
parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the rate allowed in
judgments shall no longer be twelve percent (12%) per annum - as reflected in the case of Eastern Shipping
Lines40 and Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and
4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before its amendment by BSP-MB
Circular No. 799 - but will now be six percent (6%) per annum effective July 1, 2013. It should be noted,
nonetheless, that the new rate could only be applied prospectively and not retroactively. Consequently, the twelve
percent (12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six
percent (6%) per annum shall be the prevailing rate of interest when applicable.

Corollarily, in the recent case of Advocates for Truth in Lending, Inc. and Eduardo B. Olaguer v. Bangko Sentral
Monetary Board,41 this Court affirmed the authority of the BSP-MB to set interest rates and to issue and enforce
Circulars when it ruled that "the BSP-MB may prescribe the maximum rate or rates of interest for all loans or
renewals thereof or the forbearance of any money, goods or credits, including those for loans of low priority such as
consumer loans, as well as such loans made by pawnshops, finance companies and similar credit institutions. It
even authorizes the BSP-MB to prescribe different maximum rate or rates for different types of borrowings, including
deposits and deposit substitutes, or loans of financial intermediaries."

Nonetheless, with regard to those judgments that have become final and executory prior to July 1, 2013, said
judgments shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein. 1awp++i1

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines42 are
accordingly modified to embody BSP-MB Circular No. 799, as follows:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of
the Civil Code govern in determining the measure of recoverable damages. 1âwphi1

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the
rate of interest, as well as the accrual thereof, is imposed, as follows:
Labor II – 1
When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest
shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil Code.

When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with
reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code), but when such
certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only
from the date the judgment of the court is made (at which time the quantification of damages may be deemed to
have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.

When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

And, in addition to the above, judgments that have become final and executory prior to July 1, 2013, shall not be
disturbed and shall continue to be implemented applying the rate of interest fixed therein.

WHEREFORE, premises considered, the Decision dated September 23, 2008 of the Court of Appeals in CA-G.R.
SP No. 98591, and the Resolution dated October 9, 2009 are REVERSED and SET ASIDE. Respondents are
Ordered to Pay petitioner:

(1) backwages computed from the time petitioner was illegally dismissed on January 24, 1997 up to May 27,
2002, when the Resolution of this Court in G.R. No. 151332 became final and executory;

(2) separation pay computed from August 1990 up to May 27, 2002 at the rate of one month pay per year of
service; and

(3) interest of twelve percent (12%) per annum of the total monetary awards, computed from May 27, 2002
to June 30, 2013 and six percent (6%) per annum from July 1, 2013 until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary benefits awarded and
due to petitioner in accordance with this Decision.

Labor II – 1
 96.) G.R. No. 200222, August 28, 2013

INTEGRATED MICROELECTRONICS, INC., Petitioner, v. ADONIS A. PIONILLA, Respondent.

RESOLUTION

PERLAS-BERNABE, J.:

The Court hereby resolves the Motion for Reconsideration1 filed by petitioner Integrated
Microelectronics, Inc. (IMI) from its Resolution2 dated January 14, 2013, denying its petition for
review on certiorari3 which assailed the Decision4 dated July 28, 2011 and Resolution5 dated January
16, 2012 of the Court of Appeals (CA) in CA-G.R. SP No. 113274 finding respondent Adonis A. Pionilla
(Pionilla) to have been illegally dismissed. For clarity, the Court briefly recounts the antecedents of
this case.

The Facts

On November 14, 1996, Pionilla was hired by IMI as its production worker. On May 5, 2005, Pionilla
received a notice from IMI requiring him to explain the incident which occurred the day before where
he was seen escorting a lady to board the company shuttle bus at the Alabang Terminal. It was
reported by the bus marshall that the lady was wearing a company identification card (ID) – which
serves as a free pass for shuttle bus passengers – even if she was just a job applicant at IMI. In this
regard, Pionilla admitted that he lent his ID to the lady who turned out to be his relative. He further
intimated that he risked lending her his ID to save on their transportation expenses. Nevertheless, he
apologized for his actions.6

A Conscience Committee (committee) was subsequently formed to investigate the matter. During the
committee hearing, Pionilla admitted that at the time of the incident, he had two IDs in his name as
he lost his original ID in November 2004 but was able to secure a temporary ID later. As Pionilla and
his relative were about to board the shuttle bus, they were both holding separate IDs, both in his
name. Based on the foregoing, IMI found Pionilla guilty of violating Article 6.12 of the Company Rules
and Regulations (CRR) which prohibits the lending of one’s ID since the same is considered a breach
of its security rules and carries the penalty of dismissal. Subsequently, or on August 17, 2005,
Pionilla received a letter dated August 16, 2005 informing him of his dismissal from service. Three
days after, he filed a complaint for illegal dismissal with damages against IMI.7

On May 17, 2007, the Labor Arbiter (LA) rendered a Decision8 finding Pionilla to have been illegally
dismissed by IMI and, as such, ordered the latter to reinstate him to his former position and to pay
him backwages in the amount of P417,818.78. The LA held that Pionilla was harshly
penalized,9 observing that the latter did not breach the security of the company premises since his
companion was not able to enter the said premises nor board the shuttle bus.10 The LA added that
the misdeed was not tainted with any wrongful intent as it was merely impelled by a mistaken notion
of comradeship (“pakikisama”) and gratitude (“utang na loob”) on Pionilla’s part.11 Further, the LA
held that no dishonesty can be attributed to Pionilla’s act of keeping his old ID as this appeared to be
a new charge, or at the very least, was merely incidental to the first offense of lending a company ID
to another.12 Dissatisfied, IMI elevated the matter to the National Labor Relations Commission
(NLRC).

On appeal, the NLRC, through a Decision dated June 30, 2008,13 reversed the LA’s ruling, finding
Pionilla’s dismissal to be valid. It pointed out that Pionilla’s act of lending his temporary ID was willful
and intentional as he, in fact, admitted and apologized for the same.14 The NLRC further ruled that
Pionilla’s attitude in violating the CRR could be treated as perverse as bolstered by his failure to
Labor II – 1
surrender his temporary ID despite locating the original one.15 Dissatisfied, Pionilla filed a petition
for certiorari before the CA.

On July 28, 2011, the CA rendered a Decision,16 granting Pionilla’s petition. It found that while IMI’s
regulations on company IDs were reasonable, the penalty of dismissal was too harsh and not
commensurate to the misdeed committed. It also stated that the while the right of the employer to
discipline is beyond question, it, nevertheless, remains subject to reasonable regulation.17 It further
noted that Pionilla worked with IMI for a period of nine years without any derogatory record and even
observed that his performance rating had always been “outstanding.”18 Undaunted, IMI moved for
reconsideration which was, however, denied in a Resolution19 dated January 16, 2012.

In view of the CA’s ruling, IMI filed a petition for review on certiorari before the Court which was
equally denied in a Resolution20 dated January 14, 2013, pronouncing that there was no reversible
error on the part of the CA in finding Pionilla to have been illegally dismissed. The Court ruled that
the imposition of the penalty of dismissal was too harsh and incommensurate to the infraction he
committed, this especially considering his nine years of unblemished service. Hence, the present
motion for reconsideration.

The Issue Before the Court

The essential issue for the Court’s resolution is whether or not its Resolution dated January 14, 2013
should be reconsidered. Among others, IMI contends that to award Pionilla reinstatement and full
backwages would not only be excessive and unfair, but would be contrary to existing principles of law
and jurisprudence.21

The Court’s Ruling

The motion for reconsideration is partly granted.

As a general rule, an illegally dismissed employee is entitled to reinstatement (or separation pay, if
reinstatement is not viable) and payment of full backwages.  In certain cases, however, the Court
has carved out an exception to the foregoing rule and thereby ordered the reinstatement of the
employee without backwages on account of the following: (a) the fact that dismissal of the employee
would be too harsh of a penalty; and (b) that the employer was in good faith in terminating the
employee.  The aforesaid exception was recently applied in the case of Pepsi-Cola Products, Phils.,
Inc. v. Molon,22 wherein the Court, citing several precedents, held as follows:

An illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if

reinstatement is no longer viable, and backwages.23 In certain cases, however, the Court has ordered
the reinstatement of the employee without backwages considering the fact that (1) the dismissal of
the employee would be too harsh a penalty; and (2) the employer was in good faith in terminating
the employee. For instance, in the case of Cruz v. Minister of Labor and Employment24 the Court
ruled as follows:

The Court is convinced that petitioner's guilt was substantially established. Nevertheless, we agree
with respondent Minister's order of reinstating petitioner without backwages instead of dismissal
which may be too drastic. Denial of backwages would sufficiently penalize her for her
infractions. The bank officials acted in good faith. They should be exempt from the burden of paying
backwages. The good faith of the employer, when clear under the circumstances, may
preclude or diminish recovery of backwages. Only employees discriminately dismissed are
entitled to backpay.
Likewise, in the case of Itogon-Suyoc Mines, Inc. v. National Labor Relations Commission,25 the Court
pronounced that “the ends of social and compassionate justice would therefore be served if private
respondent is reinstated but without backwages in view of petitioner's good faith.”

Labor II – 1
The factual similarity of these cases to Remandaban’s situation deems it appropriate to render the
same disposition.26 (Emphasis and underscoring in the original)
In this case, the Court observes that: (a) the penalty of dismissal was too harsh of a penalty to be
imposed against Pionilla for his infractions; and (b) IMI was in good faith when it dismissed Pionilla
as his dereliction of its policy on ID usage was honestly perceived to be a threat to the company’s
security. In this respect, since these concurring circumstances trigger the application of the exception
to the rule on backwages as enunciated in the above-cited cases, the Court finds it proper to accord
the same disposition and consequently directs the deletion of the award of backwages in favor of
Pionilla, notwithstanding the illegality of his dismissal.

WHEREFORE, the motion for reconsideration is PARTLY GRANTED. The Court’s Resolution dated
January 14, 2013 is hereby MODIFIED, directing the deletion of the award of backwages in favor of
respondent Adonis A. Pionilla

Labor II – 1
 97.) G.R. No. 205453, February 05, 2014

UNITED TOURIST PROMOTIONS (UTP) AND ARIEL D. JERSEY, Petitioners, v. HARLAND B.

KEMPLIN, Respondents.

DECISION

REYES, J.:

United Tourist Promotions (UTP), a sole proprietorship business entity engaged in the printing and
distribution of promotional brochures and maps for tourists, and its registered owner, Ariel D. Jersey
(Jersey), are now before us with a Petition for Review on Certiorari1 filed under Rule 45 of the Rules
of Court to assail the Decision2 rendered by the Court of Appeals (CA) on June 29, 2012 and the
Resolution3 thereafter issued on January 16, 2013 in CA–G.R. SP No. 118971. The assailed decision
and resolution affirmed in toto the rulings of the Sixth Division of the National Labor Relations
Commission (NLRC) and Labor Arbiter Leandro M. Jose (LA Jose) finding that Harland B. Kemplin
(Kemplin) was illegally dismissed as President of UTP.

Antecedents

In 1995, Jersey, with the help of two American expatriates, Kemplin and the late Mike Dunne, formed
UTP.

In 2002, UTP employed Kemplin to be its President for a period of five years, to commence on March
1, 2002 and to end on March 1, 2007, “renewable for the same period, subject to new terms and
conditions”.4

Kemplin continued to render his services to UTP even after his fixed term contract of employment
expired. Records show that on May 12, 2009, Kemplin, signing as President of UTP, entered into
advertisement agreements with Pizza Hut and M. Lhuillier.5

On July 30, 2009,UTP’s legal counsel sent Kemplin a letter,6 which, in part, reads: chanRoblesvirtualLawlibrary

We would like to inform you that your Employment Contract had been expired since March 1,
2007 and never been renewed. So[,] it is clear [that] you are no longer [an] employee as President
of [UTP] considering the expiration of your employment contract. However, because of your past
services to our client’s company despite [the fact that] your service is no longer needed by his
company[,] as token[,] he tolerated you to come in the office [and] as such[,] you were given
monthly commissions with allowances.

But because of your inhuman treatment x x x [of] the rank and file employees[,] which caused great
damage and prejudices to the company as evidenced [by] those cases filed against you[,]
specifically[:] (1) x x x for Grave Oral [T]hreat pending for Preliminary Investigation, Pasay
City Prosecutor’s Office x x x[;] (2) x x x for Summary Deportation[,] BID, Pasay City
Prosecutor’s Office; and (3) x x x for Grave Coercion and Grave Threats, we had no other
recourse but to give you this notice to cease and desist from entering the premises of the main
office[,] as well as the branch offices of [UTP] from receipt hereof for the protection and safety of the
company[,] as well as to the employees and to avoid further great damages that you may cause to
the company x x x.7 ChanRoblesVirtualawlibrary

On August 10, 2009, Kemplin filed before Regional Arbitration Branch No. 111 of the NLRC a
Complaint8 against UTP and its officers, namely, Jersey, Lorena Lindo9 and Larry Jersey,10 for: (a)
illegal dismissal; (b) non–payment of salaries, 13th month and separation pay, and retirement
benefits; (c) payment of actual, moral and exemplary damages and monthly commission of
P200,0000.00; and (d) recovery of the company car, which was forcibly taken from him, personal
laptop, office paraphernalia and personal books.
Labor II – 1
In Kemplin’s Position Paper,11 which he filed before LA Jose, he claimed that even after the expiration
of his employment contract on March 1, 2007, he rendered his services as President and General
Manager of UTP. In December of 2008, he began examining the company’s finances, with the end in
mind of collecting from delinquent accounts of UTP’s distributors. After having noted some accounting
discrepancies, he sent e–mail messages to the other officers but he did not receive direct replies to
his queries. Subsequently, on July 30, 2009, he received a notice from UTP’s counsel ordering him to
cease and desist from entering the premises of UTP offices.

UTP, on its part, argued that the termination letter sent to Kemplin on July 30, 2009 was based on
(a) the expiration of the fixed term employment contract they had entered into, and (b) an
employer’s prerogative to terminate an employee, who commits criminal and illegal acts prejudicial
to business. UTP alleged that Kemplin bad–mouthed, treated his co–workers as third class citizens,
and called them “brown monkeys”. Kemplin’s presence in the premises of UTP was merely tolerated
and he was given allowances due to humanitarian considerations.12

The LA’s Decision

On June 25, 2010, LA Jose rendered a Decision,13 the dispositive portion of which reads: chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the following findings are made:

1. [Kemplin] is found to be a regular employee;

2. [Kemplin] is adjudged to have been illegally dismissed even as [UTP and Jersey] are held liable
therefor;

3. Consequently, [UTP and Jersey] are ordered to reinstate [Kemplin] to his former position without
loss of seniority rights and other privileges, with backwages initially computed at this time at
[P]219,200.00;

4. The reinstatement aspect of this decision is immediately executory even as [UTP and Jersey] are
enjoined to submit a report of compliance therewith within ten (10) days from receipt hereof;

5. [UTP and Jersey] are further ordered to pay [Kemplin] his salary for July 2009 of [P]20,000.00
and 13th month pay for the year 2009 in the sum of [P]20,000.00;

6. [UTP and Jersey] are assessed 10% attorney’s fee of [P]25,920.00 in favor of [Kemplin].

All other claims are dismissed for lack of merit.

SO ORDERED.14 ChanRoblesVirtualawlibrary

LA Jose’s ratiocinations are: chanRoblesvirtualLawlibrary

[Kemplin] was able to show that he was still officially connected with [UTP] as he signed in his
capacity as President of [UTP] an (sic) advertisement agreement[s] with Pizza Hut and M. Lhuillier
Phils. as late as May 12, 2009. This only goes to show that [UTP and Jersey’s] theory of toleration
has no basis in fact.

It would appear now, per record, that [Kemplin] was allowed to continue performing and suffered to
work much beyond the expiration of his contract. Such being the case, [Kemplin’s] fixed term
employment contract was converted to a regular one under Art. 280 of the Labor Code, as amended
(Viernes vs. NLRC, et al., G.R. No. 108405, April 4, 2003).

[Kemplin’s] tenure having now been converted to regular employment, he now enjoys security of
tenure under Art. 279 of the Labor Code, as amended. Simply put, [Kemplin] may only be dismissed
Labor II – 1
for cause and after affording him the procedural requirement of notice and hearing. Otherwise, his
dismissal will be illegal.

Be that as it may, [UTP and Jersey] proceeded to argue that [Kemplin] was not illegally terminated,
for his termination was according to Art. 282 of the Labor Code, as amended, i.e., loss of trust and
confidence allegedly for various and serious offenses x x x.

However, upon closer scrutiny, in trying to justify [Kemplin’s] dismissal on the ground of loss of trust
and confidence, [UTP and Jersey] failed to observe the procedural requirements of notice and
hearing, or more particularly, the two–notice rule. It would appear that [UTP and Jersey’s] x x x
cease and desist letter compressed the two notices in one. Besides, the various and serious offenses
alluded thereto were not legally established before [Kemplin’s] separation. Ostensibly, [Kemplin] was
not confronted with these offenses and given the opportunity to explain himself.

x x x [R]espondents miserably failed to discharge their onus probandi. Hence, illegal dismissal lies.

xxx

The claim for non–payment of salary for July 2009 appears to be meritorious for failure of [UTP and
Jersey] to prove payment thereof when they have the burden of proof to do so.

The same ruling applies to the claim for 13th month pay.

However, the claims for commissions, company car, laptop, office paraphernalia and personal books
may not be given due course for failure of [Kemplin] to provide the specifics of his claims and/or
sufficient basis thereof when the burden of proof is reposed in him.15 ChanRoblesVirtualawlibrary

The Decision of the NLRC

On January 21, 2011, the NLRC affirmed LA Jose’s Decision.16 However, Lorena Lindo and Larry
Jersey were expressly excluded from assuming liability for lack of proof of their involvement in
Kemplin’s dismissal. The NLRC declared: chanRoblesvirtualLawlibrary

[A]fter the expiration of [Kemplin’s] fixed term employment, his employment from March 2, 2007
until his separation therefrom on July 30, 2009 is classified as regular pursuant to the provisions of
Article 280 of the Labor Code, to wit:chanRoblesvirtualLawlibrary

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

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

Provided, That any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists.
The aforesaid Article 280 of the Labor Code, as amended, classifies employees into three (3)
categories, namely: (1) regular employees or those whose work is necessary or desirable to the
usual business 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 services to be performed [are]
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. Regular employees are further classified
into: (1) regular employees by nature of work; and (2) regular employees by years of service. The
Labor II – 1
former refers to those employees who perform a particular activity which is necessary or desirable in
the usual business or trade of the employer, regardless of their length of service; while the latter
refers to those employees who have been performing the job, regardless of the nature thereof, for at
least a year. (Rowell Industrial Corporation vs. Court of Appeals, G.R. No. 167714, March 7, 2007)

Considering that he continued working as President for UTP for about one (1) year and five (5)
months and since [his] employment is not covered by another fixed term employment contract,
[Kemplin’s] employment after the expiration of his fixed term employment is already regular.
Therefore, he is guaranteed security of tenure and can only be removed from service for cause and
after compliance with due process. This is notwithstanding [UTP and Jersey’s] insistence that they
merely tolerated [Kemplin’s] “consultancy” for humanitarian reasons.

In termination cases, the employer bears the burden of proving that the dismissal of the employee is
for a just or an authorized cause. Failure to dispose of the burden would imply that the dismissal is
not lawful, and that the employee is entitled to reinstatement, back wages and accruing benefits.
Moreover, dismissed employees are not required to prove their innocence of the employer’s
accusations against them. (San Miguel Corporation vs. National Labor Relations Commission and
William L. Friend, Jr., G.R. No. 153983, May 26, 2009).

In this case, [UTP and Jersey] failed to prove the existence of just cause for his termination. Their
allegation of loss of trust and confidence was raised only in their position paper and was never posed
before [Kemplin] in order that he may be able to answer to the charge. In fact, he was merely told to
cease and desist from entering the premises. He was never afforded due process as he was not
notified of the charges against him and given the opportunity to be heard. Thus, there was never any
proven just cause for [Kemplin’s] termination, which makes it, therefore, illegal. x x
x.17 (Underscoring supplied)chanroblesvirtualawlibrary

The CA’s Decision

On June 29, 2012, the CA rendered the herein assailed Decision18 affirming the disquisitions of the LA
and NLRC. The CA stated that: chanRoblesvirtualLawlibrary

[Kemplin’s] presence for humanitarian reasons is purely self–serving and belied by the evidence on
record. In fact, [UTP and Jersey’s] alleged document denominated as Revocation of Power of
Attorney (executed on November 24, 2008 or MORE THAN one year from the expiration of
[Kemplin’s] employment contract) will only confirm that [Kemplin] continued rendering work x x x
beyond March 1, 2007. x x x.

xxx

Moreover, if indeed [Kemplin’s] relationship with UTP after the expiration of the former’s employment
contract was based on [UTP and Jersey’s] mere tolerance, why then did [they] have to “dismiss”
[Kemplin] based on alleged loss of trust and confidence? Clearly, [UTP’s and Jersey’s] allegation in
their Position Paper (before LA Jose) that [Kemplin] was “formally given notice of his termination as
in [sic] indicated on the Notice of Termination Letter dated July 20, 2009,” is already an indication, if
not an admission, that [Kemplin] was, indeed, still in the employ of UTP albeit without a new or
renewed contract of employment.

xxx

The validity of an employer’s dismissal from service hinges on the satisfaction of the two substantive
requirements for a lawful termination. x x x [T]he procedural aspect. And x x x the substantive
aspect.

Records are bereft of any evidence that [Kemplin] was notified of the alleged causes for his possible
dismissal. Neither was there any notice sent to him to afford him an opportunity to air his side and
defenses. The alleged Notice of Termination Letter sent by [UTP and Jersey] miserably failed to
Labor II – 1
comply with the twin–notice requirement under the law. x x x

xxx

We likewise sustain the finding of the [NLRC] that [UTP and Jersey] failed to prove the existence of
just cause for [Kemplin’s] termination. [UTP and Jersey’s] allegation of loss of trust and confidence
was raised only in their Position Paper and was never posed before [Kemplin] in order that he may be
able to answer to the charge. It is a basic principle that in illegal dismissal cases, the burden of proof
rests upon the employer to show that the dismissal of the employee is for a just cause and failure to
do so would necessarily mean that the dismissal is not justified.19 (Citations omitted) chanroblesvirtualawlibrary

On January 16, 2013, the CA issued the herein assailed Resolution20 denying UTP and Jersey’s Motion
for Reconsideration.21

Hence, the instant petition anchored on the following issues: 

Whether or not the CA erred when it:

(a) ruled that the termination of [Kemplin] was invalid or unjust;

(b) invalidated the termination of [Kemplin] for [UTP and Jersey’s] failure to afford him due process
of law;

(c) stated that the issue [of] “loss of trust and confidence” cannot be raised for the first time on
appeal; and

(d) failed to apply the doctrine of strained relations in lieu of reinstatement.22

UTP and Jersey’s Allegations

In support of the instant petition, UTP and Jersey reiterate their averments in the proceedings below.
They likewise emphasize that Kemplin is a fugitive from justice since warrants of arrest for grave oral
defamation and grave coercion23 had been issued against him by the Metropolitan Trial Court (MTC)
of Pasay City, and for qualified theft by the Regional Trial Court (RTC) of Angeles City. Kemplin’s co–
workers likewise complained about his alleged improprieties, lack of proper decorum, immorality and
grave misconduct. Kemplin also blocked UTP’s website and diverted all links towards his own site.
Consequently, UTP lost both its customers and revenues. UTP, then, as an employer, has the right to
exercise its management prerogative of terminating Kemplin, who has been committing acts inimical
to business.24

Further, citing Wenphil Corporation v. National Labor Relations Commission,25 UTP and Jersey argue
that even if it were to be assumed that procedural due process was not observed in terminating
Kemplin, still, the dismissal due to just cause should not be invalidated. Instead, a fine should just be
imposed as indemnity.26

UTP and Jersey also challenge the CA’s holding that the court need not resolve the issue of loss of
trust and confidence since it was only belatedly raised in the Position Paper filed before the LA. It is
argued that the issue was timely raised before the proper forum and Kemplin had all the opportunity
to contradict the charges against him, but he chose not to do so.27

UTP and Jersey likewise posit that a strained relationship between them and Kemplin had arisen due
to the several criminal and civil cases they had filed and which are now pending against the latter.
Hence, even if the CA were correct in holding that there was illegal dismissal, Kemplin’s
reinstatement is not advisable, practical and viable. A separation pay should just be paid instead.28

Kemplin’s Comment
Labor II – 1
In Kemplin’s Comment,29 he sought the dismissal of the instant petition.

He insists that both procedural and substantive due process were absent when he was dismissed
from service. Kemplin alleges that Jersey merely want to wrest the business away after the former
initiated new checking and collection procedures relative to UTP’s finances. Kemplin also laments that
Jersey caused him to answer for baseless criminal offenses, for which no bail can be posted.
Specifically, the indictment for qualified theft before the RTC of Angeles City involves a car registered
in UTP’s name, but which was actually purchased using Kemplin’s money.30

Kemplin further emphasizes that “the doctrine of strained relations should not be applied
indiscriminately,”31 especially where “the differences of the employer with the employee are neither
personal nor physical[,] much less serious in nature[.]”32

This Court’s Ruling

The instant petition is partially meritorious.     

The first two issues raised are factual in nature, hence, beyond the ambit of a petition filed
under Rule 45 of the Rules of Court. 

It is settled that Rule 45 limits us merely to the review of questions of law raised against the assailed
CA decision.33 The Court is generally bound by the CA’s factual findings, except only in some
instances, among which is, when the said findings are contrary to those of the trial court or
administrative body exercising quasi–judicial functions from which the action originated.34

In the case before us now, the LA, NLRC and CA uniformly ruled that Kemplin was
dismissed sans substantive and procedural due process. While we need not belabor the first two
factual issues presented herein, it bears stressing that we find the rulings of the appellate court and
the labor tribunals as amply supported by substantial evidence.

Specifically, we note the advertisement agreements35 with Pizza Hut and M. Lhuillier entered into by
Kemplin, who signed the documents as President of UTP on May 12, 2009, or more than two years
after the supposed expiration of his employment contract. They validate Kemplin’s claim that he,
indeed, continued to render his services as President of UTP well beyond March 2, 2007.

Moreover, in the letter36 dated July 30, 2009,Kemplin was ordered to cease and desist from entering
the premises of UTP.

In Unilever Philippines, Inc. v. Maria Ruby M. Rivera,37 the Court laid down in detail the steps on how
to comply with procedural due process in terminating an employee, viz: chanRoblesvirtualLawlibrary

(1) The first written notice to be served on the employees should contain the specific causes or
grounds for termination against them, and a directive that the employees are given the opportunity
to submit their written explanation within a reasonable period. “Reasonable opportunity” under the
Omnibus Rules means every kind of assistance that management must accord to the employees to
enable them to prepare adequately for their defense. This should be construed as a period of at least
five (5) calendar days from receipt of the notice to give the employees an opportunity to study the
accusation against them, consult a union official or lawyer, gather data and evidence, and decide on
the defenses they will raise against the complaint. Moreover, in order to enable the employees to
intelligently prepare their explanation and defenses, the notice should contain a detailed narration of
the facts and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged
against the employees.

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

(3) After determining that termination of employment is justified, the employers shall serve the
employees a written notice of termination indicating that: (1) all circumstances involving the
charge against the employees have been considered; and (2) grounds have been established to
justify the severance of their employment. (Underlining ours)38 ChanRoblesVirtualawlibrary

Prescinding from the above, UTP’s letter sent to Kemplin on July 30, 2009 is a lame attempt to
comply with the twin notice requirement provided for in Section 2, Rule XXIII, Book V of the Rules
Implementing the Labor Code.39

The charges against Kemplin were not clearly specified. While the letter stated that Kemplin’s
employment contract had expired, it likewise made general references to alleged criminal suits filed
against him.40 One who reads the letter is inevitably bound to ask if Kemplin is being terminated due
to the expiration of his contract, or by reason of the pendency of suits filed against him. Anent the
pendency of criminal suits, the statement is substantially bare. Besides, an employee’s guilt or
innocence in a criminal case is not determinative of the existence of a just or authorized cause for his
dismissal.41 The pendency of a criminal suit against an employee, does not, by itself, sufficiently
establish a ground for an employer to terminate the former.

It also bears stressing that the letter failed to categorically indicate which of the policies
of UTP did Kemplin violate to warrant his dismissal from service. Further, Kemplin was
never given the chance to refute the charges against him as no hearing and investigation
were conducted. Corollarily, in the absence of a hearing and investigation, the existence of
just cause to terminate Kemplin could not have been sufficiently established.

Kemplin should have been promptly apprised of the issue of loss of trust and confidence in
him before and not after he was already dismissed.  

UTP and Jersey challenge the CA’s disquisition that it need not resolve the issue of loss of trust and
confidence considering that the same was only raised in the Position Paper which they filed before LA
Jose.

UTP and Jersey’s stance is untenable.

In Lawrence v. National Labor Relations Commission,42 the Court is emphatic that: chanRoblesvirtualLawlibrary

Considering that Lawrence has already been fired, the belated act of LEP in attempting to show a just
cause in lieu of a nebulous one cannot be given a semblance of legality. The legal requirements of
notice and hearing cannot be supplanted by the notice and hearing in labor proceedings. The due
process requirement in the dismissal process is different from the due process requirement in labor
proceedings and both requirements must be separately observed x x x. Thus, LEP’s method of “Fire
the employee and let him explain later” is obviously not in accord with the mandates of law. x x
x.43
ChanRoblesVirtualawlibrary

Clearly then, UTP was not exempted from notifying Kemplin of the charges against him. The fact that
Kemplin was apprised of his supposed offenses, through the Position Paper filed by UTP and Jersey
before LA Jose, did not cure the defects attending his dismissal from employment.

While we agree with the LA, NLRC and CA’s findings that Kemplin was illegally dismissed,
grounds exist compelling us to modify the order of reinstatement and payment of
13th month benefit.
Labor II – 1
UTP and Jersey lament that the CA failed to apply the doctrine of strained relations to justify the
award of separation pay in lieu of reinstatement.

APO Chemical Manufacturing Corporation v. Bides44 is instructive anent the instances when
separation pay and not reinstatement shall be ordered. Thus: chanRoblesvirtualLawlibrary

The Court is well aware that reinstatement is the rule and, for the exception of “strained relations” to
apply, it should be proved that it is likely that, if reinstated, an atmosphere of antipathy and
antagonism would be generated as to adversely affect the efficiency and productivity of the employee
concerned.

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand,
such payment liberates the employee from what could be a highly oppressive work environment. On
the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust. Moreover, the doctrine of strained relations has been made
applicable to cases where the employee decides not to be reinstated and demands for separation
pay.45 (Citations omitted)chanroblesvirtualawlibrary

Considering that Kemplin’s dismissal occurred in 2009, there is much room to doubt the viability,
desirability and practicability of his reinstatement as UTP’s President. Besides, as a consequence of
the unsavory accusations hurled by the contending parties against each other, Kemplin’s
reinstatement is not likely to create an efficient and productive work environment, hence, prejudicial
to business and all the persons concerned.

We likewise find the award of 13th month benefit to Kemplin as improper.

In Torres v. Rural Bank of San Juan, Inc.,46 we stated that:chanRoblesvirtualLawlibrary

Being a managerial employee, the petitioner is not entitled to 13th month pay. Pursuant to
Memorandum Order No. 28, as implemented by the Revised Guidelines on the Implementation of the
13th Month Pay Law dated November 16, 1987, managerial employees are exempt from receiving
such benefit without prejudice to the granting of other bonuses, in lieu of the 13th month pay, to
managerial employees upon the employer’s discretion.47 (Citation omitted) chanroblesvirtualawlibrary

Hence, Kemplin, who had rendered his services as UTP’s President, a managerial position, is clearly
not entitled to be paid the 13th month benefit.

WHEREFORE, the instant petition is PARTIALLY GRANTED. The Decision on June 29, 2012 and the
Resolution thereafter issued on January 16, 2013 rendered by the Court of Appeals in CA–G.R. SP
No. 118971 finding that Harland B. Kemplin was illegally dismissed are AFFIRMED with
MODIFICATIONS. The award to Harland B. Kemplin of a 13th month benefit is hereby DELETED.
In lieu of his reinstatement, he is AWARDED SEPARATION PAY to be computed at the rate of one
(1) month pay for every year of service, with a fraction of at least six (6) months considered as one
whole year to be reckoned from the time of his employment on March 1, 2002 until the finality of this
Decision.48United Tourist Promotions and Ariel D. Jersey are further ORDERED TO PAY Harland
B. Kemplin legal interest of six percent (6%) per annum of the total monetary awards computed from
the finality of this Decision until full satisfaction thereof.49

The Labor Arbiter is hereby DIRECTED to re–compute the awards according to the above.

Labor II – 1
 98.) G.R. No. 211228, November 12, 2014

UNIVERSITY OF PANGASINAN, INC., CESAR DUQUE/JUAN LLAMAS AMOR/DOMINADOR

REYES, Petitioners, v. FLORENTINO FERNANDEZ AND HEIRS OF NILDA
FERNANDEZ, Respondents.

DECISION

REYES, J.:

University of Pangasinan, Inc. (UPI), an educational institution, and its former officials, Cesar Duque,
Juan Llamas Amor and Dominador Reyes (collectively referred to as the petitioners), are before this
Court with a petition for review on certiorari1 filed under Rule 45 of the Rules of Court to assail the
Decision2 rendered by the Court of Appeals (CA) on November 5, 2013 and the Resolution3 thereafter
issued on February 7, 2014 in CA-GR. SP No. 107230. The CA reversed and set aside the
Decision4 dated July 21, 2008 and Resolution5 dated November 11, 2008 of the National Labor
Relations Commission's (NLRC) First Division in NLRC-NCR CANo. 027116-01 (AE-09-06) granting the
appeal filed by the petitioners against the Order6 dated August 22, 2006 of Labor Arbiter [LA] Luis D.
Flores (LA Flores). The CA, in effect, reinstated LA Flores' order approving an updated computation of
the money claims of Florentino Fernandez (Florentino) and his now deceased wife, Nilda Fernandez
(Nilda),7 both faculty members of UPl, who were illegally dismissed from service on May 9, 2000 for
alleged dishonesty, abuse of authority and unbecoming conduct. ChanRoblesVirtualawlibrary

Antecedents

The CA aptly summarized the facts of the case up to the filing before it of the Petition
for Certiorari8 by Florentino and the heirs of Nilda (respondents), viz: chanroblesvirtuallawlibrary

This case arose from a complaint for illegal dismissal filed by [Florentino and Nilda] on May 18, 2000
against [UPl], its President Cesar Duque, Executive Vice-President Juan Llamas Amor and Director for
Student Affairs Dominador Reyes x x x.

In a Decision dated November 6, 2000, [Labor Arbiter Rolando D. Gambito (LA Gambito)] ruled that
[Florentino and Nilda] were illegally dismissed by [the petitioners]. The dispositive portion of the
Decision reads: chanroblesvirtuallawlibrary

"ACCORDINGLY, judgment is hereby rendered as follows: chanroblesvirtuallawlibrary

1. Declaring that [the petitioners] are not liable for unfair labor practice; cralawlawlibrary

2. Declaring that [Florentino and Nilda] were dismissed from their positions as college instructors
without just and valid cause; cralawlawlibrary

3. Ordering [UPl] and/or its president Cesar T. Duque, and vice-president, Juan Llamas Amor to pay
[Florentino and Nilda] backwages, allowances and other benefits computed from the date of their
dismissal on May 9, 2000 up to November 6, 2000, date of promulgation of decision; cralawlawlibrary

4. Ordering that instead of reinstatement of [Florentino and Nilda] to their former positions, [the
petitioners] should pay them separation pay equivalent to one (1) month salary for every year of
service, a fraction of at least six (6) months shall be considered as one (1) whole year; cralawlawlibrary

5. Ordering the [petitioners] to pay [Florentino and Nilda] attorney's fees in the amount of
P20,000[.00]; cralawlawlibrary

Labor II – 1
6. Denying [Florentino and Nilda's] claim for moral and exemplary damages and all other claims for
want of merit.

COMPUTATION OF AWARD:
(1) BACKWAGES (May 9-November 6, 2000);
a) [Florentino]
P10,706.95 (mo. rate) x 5 mos. &
21 days = P63,754.82
b) [Nilda]
P11,282.28 (mo. rate) x 5 mos. &
21 days = P67.180.83
TOTAL BACKWAGES P 130,935.65
(2) Separation Pay:
[Florentino]
P10,706.95x 26 years P278,380.70
[Nilda]
P11,282.28x29 years P327,186.12
TOTAL P605,566.82
ATTORNEY'S FEES:
P 20,000.00
TOTAL AWARD:
BACKWAGES P130,935.65
SEPARATION PAY P605,566.82
ATTORNEY'S FEES P 20,000.00
P756,502.47
SO ORDERED."

[The petitioners] interposed an appeal to the NLRC, which affirmed [LA Gambito's] Decision in a
Resolution dated June 29, 2001 xxx[.]

XXXX

[The petitioners] filed a Motion for Reconsideration which was granted by the NLRC in a Resolution
dated February 21, 2002, the dispositive portion of which reads: chanroblesvirtuallawlibrary

"WHEREFORE, finding compelling reasons to reverse Our previous ruling, the Motion for
Reconsideration is hereby GRANTED, the Resolution dated June 29, 2001 is hereby SET ASIDE and
the decision of [LA Gambito] REVERSED. The complaint is hereby

DISMISSED with costs against [Florentino and Nilda].

SO ORDERED."
Aggrieved, [Florentino and Nilda] filed a Petition for Certiorari with [the CA] to annul the NLRC's
Resolution dated February 21, 2002. On September 13, 2004, [the CA] rendered a Decision granting
the petition. The dispositive portion thereof reads:
chanroblesvirtuallawlibrary

"WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed resolution dated
February 21, 2002 of x x x NLRC (First Division) in NLRC NCR Case No. SUB-RAB 01-07-05-0092-00;
NLRC NCR CA No. 027116-2001 is hereby REVERSED and SET ASIDE. The decision of [LA Gambito]
dated November 6, 2000 is hereby REINSTATED.

SO ORDERED."

Labor II – 1
[UPI] appealed [the CA's] Decision to the Supreme Court but which was denied by the Supreme
Court in a Resolution dated February 21, 2005 on the ground that [UPI] failed to properly verify its
petition in accordance with Section 1, Rule 45 in relation to Section 4, Rule 7, and A.M. No. 00-2-10-
SC. [UPI's] motion for reconsideration was likewise denied with finality by the Supreme Court in a
Resolution dated June 6, 2005.

As a consequence, an Entry of Judgment was issued by the Supreme Court declaring its Resolution
dated February 21, 2005 final and executory as of July 11, 2005.

Subsequently, [Florentino and Nilda] moved for a re-computation of their award to include their
backwages and other benefits from the date of the decision of [LA Gambito] up to the finality of the
decision on July 11, 2005. They likewise moved for the issuance of a writ of execution. During the
pre-execution conference, [UPI] questioned the re-computation of [Florentino and Nilda's] backwages
and awards. In view of a stand-off, [LA Flores] required both parties to submit their respective
computations and justifications.

On August 22, 2006, [LA Flores] issued an Order ruling as follows: chanroblesvirtuallawlibrary

"Before Us is an Omnibus Motion filed by [UPI] through its legal counsel alleging among other things
the adoption of the final decision of [LA Gambito] dated November 6, 2000.

"xxx Please take note that x x x the decision rendered by the [CA] reinstating the decision of [LA
Gambito] xxx was declared final and executory by no less than the Supreme Court of the Philippines
by its issuance of a final entry of Judgment dated July 11, 2005.

Hence, there is a need to update and upgrade the computation of money claims and separation pay
which has amounted now to P2,165,467.02 as finally completed by our Labor Arbitration Associate
Galo Regino L. Esperanza hereto attached as Annex "A".

The pending motion to Dismiss is hereby set aside for lack of merit.

The substitution of [the] heirs of [Nilda] is hereby granted.

SO ORDERED."

On the same date (August 22, 2006), [LA Flores] issued a writ of execution.

[UPI] filed a Motion for Reconsideration of the above Order but it was denied by [LA Flores] in an
Order dated September 12, 2006 on the ground that no motion for reconsideration of any order or
decision is allowed under Section 19, Rule V of the NLRC Rules of Procedure.

In another Order likewise dated September 12, 2006, [LA Flores] denied [UPI's] Motion to Quash
Writ of Execution and directed the sheriff to proceed with the due execution of the writ.

[The petitioners] interposed an appeal to the NLRC questioning [LA Flores'] Orders dated August 22,
2006 and September 12, 2006 basically alleging that [Florentino and Nilda] are only entitled to the
amount of P756,502.47 awarded by [LA Gambito] in the Decision dated November 6, 2000, and not
the recomputed amount of P2,165,467.02.

In the assailed Decision dated July 21, 2008, the NLRC granted the appeal, x x x

xxxx

[Florentino and Nilda] filed a Motion for Reconsideration but it was denied by the NLRC in a
Labor II – 1
Resolution dated November 11, 2008 x x x[.]

x x x x9 (Citations omitted and italics in the original)

Proceedings before the CA

The respondents filed before the CA a Petition for Certiorari10 primarily anchored on the issue of what
the proper basis was for the computation of backwages and benefits to be paid to an employee. They
claimed that the reckoning period should be from the time of illegal dismissal on May 9, 2000 up to
the finality of the decision to be executed on July 11, 2005 as stated in the Entry of Judgment.
Further, an interest of 12% per annum should be imposed upon the total adjudged award.

On November 5, 2013, the CA rendered the assailed Decision, the decretal portion of which reads: chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the Petition for Certiorari  is GRANTED. The Decision dated July
21, 2008 and Resolution dated November 11, 2008 of the [NLRC] are REVERSED and SET
ASIDE and [LA Flores'] Order dated August 22, 2006 is REINSTATED.

[The petitioners] are ORDERED to PAY [the respondents] the following: chanroblesvirtuallawlibrary

1) backwages computed from May 9, 2000 (the date when [Florentino and Nilda] were illegally
dismissed from employment) up to July 11, 2005 (the date of the finality of the Supreme Court's
Resolution per Entry of Judgment); cralawlawlibrary

2) separation pay computed from [Florentino and Nilda's] respective first day[s] of employment with
[UPI] up to July 11, 2005 at the rate of one month pay per year of service; cralawlawlibrary

3) attorney's fees in the amount of P20,000.00; and

4) legal interest of twelve percent (12%) per annum of the total monetary awards computed from
July 11, 2005 until their full satisfaction.

The [LA] is hereby ORDERED to make another re-computation according to the above directives.

SO ORDERED.11

In explaining its decision, the CA cited the following reasons: chanroblesvirtuallawlibrary

We are mindful of the principle of immutability of judgment [and] that the fallo embodies the court's
decisive action on the issue/s posed, and is thus the part of the decision that must be enforced
during execution. However, said doctrine finds no application in the case at bench.

It must be stressed that in illegal dismissal cases, the re-computation of backwages and similar
benefits is merely an inevitable consequence of the delay in paying the awards stated in the [LA's]
decision. The instant controversy is not novel and was settled and adequately explained by the
Supreme Court in the case of Session Delights Ice Cream and Fast Foods vs. [CA], viz: chanroblesvirtuallawlibrary

xxxx

In concrete terms, the question is whether a re-computation in the course of execution of

the [LA's] original computation of the awards made, pegged as of the time the decision
was rendered and confirmed with modification by a final CA decision, is legally proper. The
question is posed, given that the petitioner did not immediately pay the awards stated in the
original [LA's] decision; it delayed payment because it continued with the litigation until
final judgment at the CA level.

Labor II – 1
A source of misunderstanding in implementing the final decision in this case proceeds from the way
the original [LA] framed his decision. The decision consists essentially of two parts.

The first is that part of the decision that cannot now be disputed because it has been
confirmed with finality. This is the finding of the illegality of the dismissal and the awards of
separation pay in lieu of reinstatement, backwages, attorney's fees, and legal interests.
The second part is the computation of the awards made. On its face, the computation the [LA]
made shows that it was time-bound as can be seen from the figures used in the computation. This
part, being merely a computation of what the first part of the decision established and declared, can,
by its nature, be re-computed. This is the part, too, that the petitioner now posits should no longer
be re-computed because the computation is already in the [LA's] decision that the CA had affirmed.
The public and private respondents, on the other hand, posit that a re-computation is necessary
because the relief in an illegal dismissal decision goes all the way up to reinstatement if
reinstatement is to be made, or up to the finality of the decision, if separation pay is to be given in
lieu reinstatement.
That the [LA's] decision, at the same time that it found that an illegal dismissal had taken place, also
made a computation of the award, is understandable in light of Section 3, Rule VIII of the then NLRC
Rules of Procedure which requires that a computation be made. This Section in part states:
[T]he [LA] of origin, in cases involving monetary awards and at all events, as far as practicable, shall
embody in any such decision or order the detailed and full amount awarded.
Clearly implied from this original computation is its currency up to the finality of the [LA's]
decision. As we noted above, this implication is apparent from the terms of the computation itself,
and no question would have arisen had the parties terminated the case and implemented the
decision at that point.
xxxx

We see no error in the CA decision confirming that a re-computation is necessary as it

essentially considered the [LA's] original decision in accordance with its basic component
parts as we discussed above. To reiterate, the first part contains the finding of illegality and its
monetary consequences; the second part is the computation of the awards or monetary
consequences of the illegal dismissal, computed as of the time of the [LA's] original decision.

To illustrate these points, had the case involved a pure money claim for a specific sum (e.g., salary
for a specific period) or a specific benefit (e.g., 13l month pay for a specific year) made by a former
employee, the [LA's] computation would admittedly have continuing currency because the sum is
specific and any variation may only be on the interests that may run from the finality of the decision
ordering the payment of the specific sum.

In contrast with a ruling on a specific pure money claim, is a claim that relates to status (as in this
case, where the claim is the legality of the termination of the employment relationship). In this type
of cases, the decision or ruling is essentially declaratory of the status and of the rights, obligations
and monetary consequences that flow from the declared status (in this case, the payment of
separation pay and backwages and attorney's fees when illegal dismissal is found). When this type of
decision is executed, what is primarily implemented is the declaratory finding on the status
and the rights and obligations of the parties therein; the arising monetary consequences
from the declaration only follow as component of the parties' rights and obligations.

In the present case, the CA confirmed that indeed an illegal dismissal had taken place, so that
separation pay in lieu of reinstatement and backwages should be paid. How much that separation
pay would be, would ideally be stated in the final CA decision; if not, the matter is for handling
and computation by the [LA] of origin as the labor official charged with the
implementation of decisions before the NLRC.

Labor II – 1
As the CA correctly pointed out, the basis for the computation of separation pay and backwages is
Article 279 of the Labor Code, as amended, which reads:
"xxx 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."

xxxx
Consistent with what we discussed above, we hold that under the terms of the decision under
execution, no essential change is made by a re-computation as this step is a necessary
consequence that flows from the nature of the illegality of dismissal declared in that
decision. A re-computation (or an original computation, if no previous computation has
been made) is a part of the law - specifically, Article 279 of the Labor Code and the
established jurisprudence on this provision - that is read into the decision. By the nature of
an illegal dismissal case, the reliefs continue to add on until full satisfaction, as expressed
under Article 279 of the Labor Code. The re-computation of the consequences of illegal
dismissal upon execution of the decision does not constitute an alteration or amendment
of the final decision being implemented. The illegal dismissal ruling stands; only the
computation of monetary consequences of this dismissal is affected and this is not a
violation of the principle of immutability of final judgments.

xxxx

That the amount the petitioner shall now pay has greatly increased is a consequence that
it cannot avoid as it is the risk that it ran when it continued to seek recourses against the
[LA's] decision. Article 279 provides for the consequences of illegal dismissal in no uncertain terms,
qualified only by jurisprudence in its interpretation of when separation pay in lieu of reinstatement is
allowed. When that happens, the finality of the illegal dismissal decision becomes the
reckoning point instead of the reinstatement that the law decrees. In allowing separation
pay, the final decision effectively declares that the employment relationship ended so that separation
pay and backwages are to be computed up to that point. The decision also becomes a judgment
for money from which another consequence flows - the payment of interest in case of
delay. This was what the CA correctly decreed when it provided for the payment of the
legal interest of 12% from the finality of the judgment, in accordance with our ruling
in Eastern Shipping Lines, Inc. v. [CA].

x x x The strict legalism in limiting the computation of the backwages and other benefits simply
because the Decision of the [LA] provided a computation only up to the date of the promulgation of
his Decision on November 6, 2000 cannot override or prejudice the substantive rights of an illegally
dismissed employee under the law and extant jurisprudence.

Likewise, pursuant to the above ruling of the Supreme Court, the monetary award in favor of [the
respondents] should earn legal interest at the rate of 12% from July 11, 2005, the date of the finality
of the Decision, as a necessary consequence of [the petitioners'] legal actions in questioning the
execution of the [LA's] Decision x x x.

xxxx

With regard to [the respondents'] claims for additional attorney's fees as well as moral and
exemplary damages, suffice it to state that the [LA] has already awarded [in their favor] the amount
of P20,000.00 as attorney's fees but denied [their] claim for damages in his Decision dated
November 6, 2000. Any modification, which effectively increases or decreases the original amount
awarded as attorney's fees is not included or contemplated in the discussion above on re-
computation of monetary awards. Pursuant to the Session Delights Ice Cream and Fast Foods ruling,
the award of attorney's fees involves a specific sum and "would have continuing currency". If at all,
Labor II – 1
the attorney's fees awarded in favor of [the respondents] will earn legal interest pursuant to the rules
laid down in Eastern Shipping Lines vs. [CA].

[The respondents'] claim for moral and exemplary damages was correctly denied by the [LA]. While
their dismissal may be illegal, there was no showing that [the petitioners] acted in bad faith, x x
x.12 (Citations omitted)

The CA, in the herein assailed Resolution issued on February 7, 2014, denied the petitioners' Motion
for Reconsideration.13 ChanRoblesVirtualawlibrary

Issues

Unperturbed, the petitioners seek to reverse the CA's ruling by presenting before this Court the
arguments below: chanroblesvirtuallawlibrary

A.

A FINAL AND EXECUTORY DECISION IS IMMUTABLE AND CAN NO LONGER BE MODIFIED. THE
ORDER OF [LA] FLORES, AS SUSTAINED IN THE ASSAILED RULINGS, CANNOT MODIFY THE FINAL
AND EXECUTORY GAMBITO DECISION. ChanRoblesVirtualawlibrary

B.

EVEN ASSUMING ARGUENDO  THAT THE RE-COMPUTATION OF AWARDS IS VALID, [UPI] IS NOT

LIABLE TO PAY BACKWAGES AND SEPARATION PAY FOR THE FULL PERIOD FROM 06 NOVEMBER
2000 UP TO 11 JULY 2005. RESPONDENTS WERE NOT REINSTATED IN THE GAMBITO DECISION. ChanRoblesVirtualawlibrary

C.

RESPONDENTS ARE NOT ENTITLED TO BACKWAGES AND SEPARATION PAY BEYOND THEIR
RETIREMENT AGES. NEITHER ARE THEY ENTITLED TO LEGAL INTEREST AT 12%.14 chanrobleslaw

In support of the instant petition, the petitioners allege that the doctrines enunciated in Session
Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division) 15 do not apply in the case at
bar. LA Gambito explicitly qualified the award of backwages and separation pay to be computed from
the date of dismissal up to November 6, 2000. The said qualification appears both in the immutable
and computation portions of the judgment.16

The petitioners also lament that the writ of execution issued by LA Flores included an award of
13th month pay, which is nowhere to be found in LA Gambito's decision.17

It is further claimed that the petitioners did not immediately satisfy LA Gambito's award because the
NLRC reversed the same. Hence, the petitioners cannot be faulted for relying upon the NLRC decision
and defending it before the CA. Consequently, even if backwages and separation pay were really due,
their computation should not include the period from February 21, 2002 to September 13,
2004,18 during which time the NLRCs disquisition that there was no illegal dismissal stood.19

The petitioners likewise aver that since Florentine and Nilda turned 60 on December 11, 2002 and
April 30, 2002, respectively, backwages and separation pay could only be computed up to those
dates. Under both UPI's retirement plan and Article 28720 of the Labor Code, 60 is the optional
retirement age. On July 18, 2005, Florentino and Nilda filed separate claims for retirement benefits.
They, in effect, had admitted that 60 and not 65 is the retirement age for UPI's faculty members.
Relevantly, in Espejo v. NLRC,21 the Court ruled that an employee may retire, or may be retired by
his employer upon reaching the age of 60.[22

Labor II – 1
Lastly, the petitioners cite Nacar v. Gallery Frames23 to argue that legal interest should only be 6%
and not 12%.24

In their Comment,25  the respondents insist that Florentine's compulsory retirement was due only on
cralawred

the day before he turned 65 on December 11, 2002. Nilda, on the other hand, would have been
retired only on the day before she died on May 7, 2006.26 The respondents likewise claim that 12%
and not 6% should be imposed upon the award as annual interest. ChanRoblesVirtualawlibrary

Ruling of the Court

This Court affirms but modifies the ruling of the CA.

The issues, being interrelated, shall be discussed jointly.

Updating the computation of awards to

include as well backwages  and separation
pay corresponding to the period after the
rendition of LA Gambito's decision on
 
November 6, 2000 up to its finality on
July 11, 2005 is not violative of the
principle of immutability of a final and
executory judgment.

This Court need not belabor the first two issues raised since they have been amply discussed by the
CA in the assailed decision and resolution.

In Session Delights aptly quoted by the CA and reiterated in several cases including Nacar and
Gonzales v. Solid Cement Corporation,27 the Court was emphatic that: chanroblesvirtuallawlibrary

[N]o essential change is made by a re-computation as this step is a necessary consequence that
flows from the nature of the illegality of dismissal declared in that decision. A re-computation (or an
original computation, if no previous computation has been made) is a part of the law—specifically,
Article 279 of the Labor Code and the established jurisprudence on this provision—that is read into
the decision. By the nature of an illegal dismissal case, the reliefs continue to add on until full
satisfaction, as expressed under Article 279 of the Labor Code. The re-computation of the
consequences of illegal dismissal upon execution of the decision does not constitute an alteration or
amendment of the final decision being implemented. The illegal dismissal ruling stands; only the
computation of monetary consequences of this dismissal is affected and this is not a violation of the
principle of immutability of final judgments.

xxxx

That the amount the petitioner shall now pay has greatly increased is a consequence that it cannot
avoid as it is the risk that it ran when it continued to seek recourses against the labor arbiter's
decision. Article 279 provides for the consequences of illegal dismissal in no uncertain terms,
qualified only by jurisprudence in its interpretation of when separation pay in lieu of reinstatement is
allowed. When that happens, the finality of the illegal dismissal decision becomes the reckoning point
instead of the reinstatement that the law decrees. In allowing separation pay, the final decision
effectively declares that the employment relationship ended so that separation pay and backwages
are to be computed up to that point, x x x.28 (Citation omitted and underscoring ours)

Prescinding from the above, the Court finds no reversible error committed by the CA when it affirmed
LA Flores' Order dated August 22, 2006, which allowed the updating beyond November 6, 2000 of

Labor II – 1
the computation of backwages and separation pay awarded to the respondents. The CA correctly
ruled that the backwages should be computed from May 9, 2000, the date of illegal dismissal, up to
July 11, 2005, the date of the Entry of Judgment, while separation pay should be reckoned from the
respective first days of employment of Florentino and Nilda up to July 11, 2005 as well.

While the dispositive portion of the herein

assailed CA decision did not explicitly
refer to the 13th month pay, its inclusion  
in the computation approved by LA
Flores is proper.

Presidential Decree No. 85129 (P.D. No. 851) is the law directing the 13th month payment. On the
other hand, Article 279 of the Labor Code in part provides that an illegally-dismissed employee shall
be entitled to full backwages, inclusive of allowances, and other benefits or their monetary equivalent
computed from the time compensation was withheld up to the time of actual reinstatement.

In Gonzales, a final and executory decision of the LA did not explicitly award the 13th month pay.
During the execution proceedings, the NLRC included it in the computation. The CA deleted the
same. This Court thereafter ruled that the CA abused its discretion since "the 13th month pay fell due
x x x by legal mandate."30

In the body and dispositive portion of LA Gambito's Decision31 dated November 6, 2000, which
became final and executory on July 11, 2005, he did not explicitly include the 13th month pay in the
award. However, the decision stated that Florentino and Nilda were entitled to full backwages and
other benefits.

Subsequently, the Labor Arbitration Associate's updated computation of the award32 included the
13th month pay and was approved by LA Flores through the latter's August 22, 2006 Order. The NLRC
set aside LA Flores' order, but the CA reinstated the same. The dispositive portion of the CA decision
expressly ordered the award of backwages, separation pay, attorney's fees and legal interest, but
conspicuously absent was a reference to the inclusion of the 13th month pay.33

The Court finds that despite the CA's non-explicit reference to the 13th month pay, following the
doctrine in Gonzales, its inclusion in the computation is proper. Entitlement to it is a right granted by
P.D. No. 851. Besides, the computation of award for backwages and other benefits is a mere legal
consequence of the finding that there was illegal dismissal.34

In computing the backwages and benefits

awarded to the respondents, the
reckoning period is not interrupted by the  
NLRC's reversal of LA Gambito's finding
of illegal dismissal.

The petitioners argue that even if backwages and benefits were really due, the computation should
not include the period from February 21, 2002 to September 13, 2004, during which time the NLRC's
disquisition that there was no illegal dismissal stood.

The argument fails to persuade.

In Gonzales, the Court stated that the increase in the amount that the corporation had to pay "is a
consequence that it cannot avoid as it is the risk that it ran when it continued to seek recourses
against the [LA's] decision."35

Labor II – 1
Further, in Reyes v. NLRC, et al,36 the Court declared that: chanroblesvirtuallawlibrary

One of the natural consequences of a finding that an employee has been illegally dismissed is the
payment of backwages corresponding to the period from his dismissal up to actual
reinstatement. The statutory intent of this matter is clearly discernible. The payment of backwages
allows the employee to recover from the employer that which he has lost by way of wages as a result
of his dismissal. Logically, it must be computed from the date of petitioner's illegal dismissal up to
the time of actual reinstatement. There can be no gap or interruption, lest we defeat the very reason
of the law in granting the same, x x x.37 (Citation omitted and underscoring ours)

Although in Reyes, the issue relates to the delay in filing of the complaint for illegal dismissal from
the time of termination, there is no preclusion to apply the doctrine that there should be no gap or
interruption in the reckoning period during which the dismissed employee is entitled to backwages
and benefits. The statutory intent in the award of backwages and benefits is clear. Further, as
declared in Gonzales, an employer takes a risk in assailing the LA's finding of illegal dismissal, but
there is no insulation from the consequences therefrom.

The CA properly imposed a legal interest

upon the total monetary award reckoned
from the Entry of Judgment on July 11,
2005 until full satisfaction thereof, but the  
Court modifies the rate indicated in the
assailed decision to conform to the
doctrine in Nacar.

In Gonzales, the Court stated that when there is a finding of illegal dismissal and an award of
backwages and separation pay, "[t]he decision also becomes a judgment for money from which
another consequence flows—the payment of interest in case of delay."38

Again in Gonzales, the Court instructed that legal interest is imposable upon the "total unpaid
judgment amount, from the time x x x the decision (on the merits in the original case) became
final."39

In the case at bar, the CA properly imposed the legal interest upon the total monetary award even if
none was explicitly included in the fine print of LA Gambito's decision and LA Flores' order. The
imposition of legal interest is not to be considered as an alteration of the final judgment to be
executed. The legal interest is already deemed read into the decision.

As to the correct rate of imposable interest, the petitioners argue that only 6% and not 12% is
mandated pursuant to the ruling in Nacar.

Nacar is instructive anent the rate of interest imposable upon the total adjudged monetary
award, viz: chanroblesvirtuallawlibrary

[T]he Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution No. 796 dated May 16,
2013, approved the amendment of Section 240 of Circular No. 905, Series of 1982 and, accordingly,
issued Circular No. 799,41Series of 2013. effective July 1, 2013, the pertinent portion of which
reads: chanroblesvirtuallawlibrary

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions
governing the rate of interest in the absence of stipulation in loan contracts, thereby amending
Section 2 of Circular No. 905, Series of 1982:

Labor II – 1
Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the
rate allowed in judgments, in the absence of an express contract as to such rate of interest, shall be
six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and
Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.

This Circular shall take effect on 1 July 2013.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that
would govern the parties, the rate of legal interest for loans or forbearance of any money, goods or
credits and the rate allowed in judgments shall no longer be twelve percent (12%) per annum - as
reflected in the case of Eastern Shipping Lines and Subsection X305.1 of the Manual of Regulations
for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for Non-Bank
Financial Institutions, before its amendment by BSP-MB Circular No. 799 - but will now be six percent
(6%) per annum effective July 1, 2013. It should be noted, nonetheless, that the new rate could only
be applied prospectively and not retroactively. Consequently, the twelve percent (12%)per
annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new rate of six
percent (6%) per annum shall be the prevailing rate of interest when applicable.

xxxx

Nonetheless, with regard to those judgments that have become final and executory prior to July 1,
2013, said judgments shall not be disturbed and shall continue to be implemented applying the rate
of interest fixed therein.42 (Some citations omitted and underscoring ours)

In Nacar, during the execution proceedings, the LA, NLRC and the CA did not impose a legal interest
upon the total adjudged award. Thereafter, this Court granted the petition filed before it by the
dismissed employee pleading for the imposition upon the monetary award of the legal interest, which
the Court declared to be 12% per annum from the date of the Entry of Judgment on May 27, 2002 to
June 30, 2013, and 6% per annum from July 1, 2013 until their full satisfaction.

Similarly, in the case of Florentino and Nilda, LA Gambito's decision became final and executory on
July 11, 2005, during which time, the prevailing rate of legal interest was 12%. Note, however, that
LA Gambito's decision and subsequently, even LA Flores' Order, dated August 22, 2006, made no
explicit award of legal interest. As discussed above though, the imposition of the legal interest is
already deemed read into the decision and order. For the same reason, the CA, in the herein assailed
decision, expressly included the said interest in the computation.

In Nacar, and in the case before this Court now", the judgments finding that the employees were
illegally dismissed became final and executory before July 1, 2013. In both cases too, the said
judgments did not explicitly include the imposition of the legal interest upon the total adjudged
award. In the case of Florentino and Nilda, it was the CA, which first expressly included the legal
interest in the equation. In Nacar, this Court made the explicit inclusion and pegged the rate at 12%
from the date of the Entry of Judgment up to June 30, 2013, and at 6% from July 1, 2013 until full
satisfaction thereof. The circumstances in the instant petition are similar to the foregoing,
hence, Nacar finds application. Consequently, the Court imposes upon the total adjudged award an
interest of 12% interest  per annum  reckoned from July 11, 2005 until June 30, 2013. The interest of
6% per annum is imposed from July 1, 2013 until full satisfaction of the judgment award.

The computation of backwages and

separation pay due to Florentino and Nilda
properly includes the period from 2002 to 2005.

The petitioners point out that Florentino and Nilda turned 60 on December 11, 2002 and April 30,
Labor II – 1
2002, respectively. Thus, backwages and separation pay could only be computed up to those dates
since under both UPI's retirement plan and Article 287 of the Labor Code, 60 is the optional
retirement age. Further, on July 18, 2005, Florentino and Nilda filed separate claims for retirement
benefits, hence, effectively admitting that 60 and not 65 is the retirement age for UPI's faculty
members.

Nilda and Florentino were born on April 30, 1942 and December 11, 1942, respectively. In 2002,
both had turned 60 and can opt to retire. The Court cannot, however, agree that this is the cut-off
date for the computation of backwages and separation pay due to them because of the reason's
discussed below.

First, 60 is merely an optional but not the mandatory retirement age. Second,  the evidence
submitted do not show at whose option it is to retire the faculty members before the age of
65. Third, there is no proof whatsoever that the faculty members of UPI indeed retire at 60 years of
age. Fourth, Florentino and Nilda filed claims for retirement pay in 2005 when they were both 63,
hence, their acts did not necessarily constitute an admission that 60 is the retirement age for UPI's
faculty members.

In view of the above, the Court finds that no mistake was committed by LA Flores and the CA in
allowing the computation of backwages and separation pay due to Florentino and Nilda to include the
period beyond 2002.

WHEREFORE, premises considered, the Decision of the Court of Appeals rendered on November 5,
2013, and the Resolution issued on February 7, 2014 in CA-G.R. SP No. 107230
are AFFIRMED with MODIFICATIONS. The petitioners herein, University of Pangasinan,
Inc. and its former officials, Cesar Duque, Juan Llamas Amor and Dominador
Reyes are ORDERED TO PAY Florentino Fernandez and the Heirs of Nilda Fernandez the
following:chanroblesvirtuallawlibrary

(1) backwages, including the 13th month pay, to be computed from May 9, 2000, the date of illegal
dismissal from employment, up to July 11, 2005, the date of finality of the Court Resolution in G.R.
No. 166103 per Entry of Judgment; cralawlawlibrary

(2) separation pay computed from Florentino Fernandez and Nilda Fernandez's respective first days
of employment with the University of Pangasinan, Inc. up to July 11, 2005 at the rate of one month
pay per year of service; cralawlawlibrary

(3) attorney's fees in the amount of P20,000.00; and

(4) interest of twelve percent (12%) per annum of the total monetary award, computed from July 11,
2005 to June 30, 2013, and six percent (6%) per annum from July 1,2013 until full satisfaction.

The LABOR ARBITER is hereby ORDERED to make a RECOMPUTATION of the total monetary

benefits awarded and due to Florentino Fernandez and Nilda Fernandez in accordance with this
Resolution.

Labor II – 1
99.) G.R. No. 207983               April 7, 2014

WENPHIL CORPORATION, Petitioner,
vs.
ALMER R. ABING and ANABELLE M. TUAZON, Respondents.

DECISION

BRION, J.:

We resolve this petition for review on certiorari  under Rule 45 of the Rules of Court, challenging the August 31,
1

2012 decision  and the June 20, 2013 resolution  (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP
2 3

No. 117366.

These assailed CA rulings annulled and set aside the March 26, 2010 Decision  and September 15, 2010  resolution
4 5

(NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC CA No. 02-8233-01 (Rl-08).

The NLRC rulings, in turn, fully affirmed the November 16, 2007 Order  of the Labor Arbiter (LA) in NLRC-NCR
6

Case Nos. 30-03-00993-00 and 30-03-01020-00. The LA’s order found that an illegal dismissal took place. Thus,
the LA directed petitioner Wenphil Corporation (Wenphil) to pay respondents Almer Abing and Anabelle Tuazon
(respondents) their backwages for the period from February 15, 2002 to November 8, 2002, pursuant to the rule that
an order of reinstatement is immediately executory even pending appeal. 7

Factual Antecedents

This case stemmed from a complaint for illegal dismissal filed by the respondents against Wenphil, docketed as
NLRC NCR Case No. 30-03-00993-00.

On December 8, 2000, LA Geobel A. Bartolabac ruled  that the respondents had been illegally dismissed by
8

Wenphil. According to the LA, the allegation of serious misconduct against the respondents had no factual and legal
basis.  Consequently, LA Bartolabac ordered Wenphil to immediately reinstate the respondents to their respective
9

positions or to equivalent ones, whether actuall or in the payroll. Also, the LA ordered Wenphil to pay the
respondents their backwages from February 3, 2000 until the date of their actual reinstatement. 10

Because of the unfavorable LA decision, Wenphil appealed to the NLRC on April 16, 2001 . In the meantime, the
11

respondents moved for the immediate execution of the LA’s December 8, 2000 decision. 12

On October 29, 2001, Wenphil and the respondents entered into a compromise agreement  before LA Bartolabac.
13

They agreed to the respondents’ payroll reinstatement while Wenphil’s appeal with the NLRC was ongoing. Wenphil
also agreed to pay the accumulated salaries of the respondents for the payroll period from April 5, 2001 until
October 15, 2001.  As for the remaining payroll period starting October 16, 2001, Wenphil committed itself to credit
14

the respective salaries of the respondents to their ATM payroll accounts until such time that the questioned decision
of LA Bartolabac is either modified, amended or reversed by the Honorable National Labor Relations Commission. 15

On January 30, 2002, the NLRC issued a resolution  affirming LA Bartolabac’s decision with modifications. Instead
16

of ordering the respondents’ reinstatement, the NLRC directed Wenphil to pay the respondents their respective
separation pay at the rate of one (1) month salary for every year of service. Also, the NLRC found that while the
respondents had been illegally dismissed, they had not been illegally suspended. Thus, the period from February 3
to February 28, 2000 during which the respondents were on preventive suspension – was excluded by the NLRC in
the computation of the respondents’ backwages. 17

Subsequently, Wenphil moved for the reconsideration  of the NLRC’s January 30, 2002 resolution, but the NLRC
18

denied the motion in another resolution dated September 24, 2002. 19

Labor II – 1
Wenphil thereafter went up to the CA via a petition for certiorari to question the NLRC’s January 30, 2002 and
September 24, 2002 resolutions.  On August 27, 2003, the CA rendered its decision  reversing the NLRC’s finding
20 21

that the respondents had been illegally dismissed. According to the CA, there was enough evidence to show that
the respondents had been guilty of serious misconduct; thus, their dismissal was for a valid cause.  The 22

respondents moved for the reconsideration of the CA’s decision.  In a resolution  dated February 23, 2004, the CA
23 24

denied the respondents’ motion.

On appeal to the Supreme Court (SC) via Rule 45 (docketed as G.R. No. 162447  and dated December 27, 2006),
25

the SC denied the respondents petition for review on certiorari  and affirmed the CA’s August 27, 2003 decision and
26

February 23, 2004 resolution. The respondents did not file any motion for reconsideration to question the SC’s
decision; thus, the decision became final and executory on February 15, 2007. 27

The Labor Arbitration Rulings

Sometime after the SC’s decision in G.R. No. 162447 became final and executory, the respondents filed with LA
Bartolabac a motion for computation and issuance of writ of execution.  The respondents asserted in this motion
28

that although the CA’s ruling on the absence of illegal dismissal (as affirmed by the SC) was adverse to them, under
the law and settled jurisprudence, they were still entitled to backwages from the time of their dismissal until the
NLRC’s decision finding them to be illegally dismissed was reversed with finality. 29

LA Bartolabac granted the respondents’ motion and, in an order dated November 16, 2007,  directed Wenphil to 30

pay each complainant their salaries on reinstatement covering the period from February 15, 2002 (the date Wenphil
last paid the respondents’ respective salaries) to November 8, 2002 (since the NLRC’s decision finding the
respondents illegally dismissed became final and executory on February 28, 2002).

Both parties appealed to the NLRC to question LA Bartolabac’s November 16, 2007 order.  Wenphil argued that the 31

respondents were no longer entitled to payment of backwages in view of the compromise agreement they executed
on October 29, 2001. According to Wenphil, the compromise agreement provided that Wenphil’s obligation to pay
the respondents’ backwages should cease as soon as LA Bartolabac’s decision was "modified, amended or
reversed" by the NLRC. Since the NLRC modified the LA’s ruling by ordering the payment of separation pay in lieu
of reinstatement, then the respondents, under the terms of the compromise agreement, were entitled to backwages
only up to the finality of the NLRC decision. 32

The respondents questioned in their appeal the determined period for the computation of their backwages; they
posited that the period for payment should end, not on November 8, 2002, but on February 14, 2007, since the SC’s
decision which upheld the CA’s ruling became final and executory on February 15, 2007. 33

The NLRC denied the parties’ respective appeals in its decision dated March 26, 2010  and affirmed in toto the LA’s
34

order. Both parties moved for the reconsideration of the NLRC’s decision but the NLRC denied their respective
motions in the resolution of September 15, 2010. 35

The CA’s Ruling

In its decision dated August 31, 2012,  the CA reversed the NLRC rulings and prescribed a different computation
36

period.

The CA ruled that the NLRC committed grave abuse of discretion when it affirmed the LA’s computed period which
was from February 15, 2002 to November 8, 2002. In arriving at this conclusion, the CA cited the case of Pfizer v.
Velasco  where this Court ruled that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it
37

is obligatory on the part of the employer to reinstate and pay the dismissed employee’s wages during the period of
appeal until reversal by the higher court.  The CA construed this "higher court" to be the CA, not the SC.
38

The CA reasoned out that it was a "higher court" than the NLRC when it reversed the NLRC’s rulings; thus, the
period for computation should end when it promulgated its decision reversing that of the NLRC, and not on the date
when the SC affirmed its decision.

Labor II – 1
The CA likewise held that the compromise agreement did not contain any waiver of rights for any award the
respondents might have received when the NLRC changed or modified the LA’s award. 39

The Petition

In its petition for review with this Court, Wenphil maintained that the respondents were no longer entitled to payment
of backwages in view of the modification of the LA’s ruling by the NLRC pursuant with their October 29, 2001
compromise agreement.

Wenphil argued that the CA utterly disregarded the terms of the parties’ compromise agreement whose terms were
very clear; the agreement reads:

3. That for the payroll period from October 16-31 and thereafter, their [respondents] salaries (net of withholding tax,
SSS, Philhealth and Pag-ibig) shall be credited every 10th and 25th of the succeeding months through their
respective ATM employee’s account until such time that the questioned decision of the Honorable Labor Arbiter
Geobel Bartolabac is modified, amended or reversed by the Honorable Labor Relations Commission.  [emphasis
40

ours]

It was Wenphil’s assertion that since the NLRC’s decision partly changed the decision of LA Bartolabac by ordering
payment of separation pay in lieu of reinstatement, the NLRC decision was a "modification" that should operate to
remove Wenphil’s obligation to pay the respondents’ backwages for the period of the CA’s reversal of the NLRC’s
illegal dismissal ruling.  According to Wenphil, the words of the compromise agreement left no room for
41

interpretation as to the parties’ intentions;  as a valid agreement between the parties, it must be given effect and
42

respected by the court.

Wenphil also contended that the CA’s cited Pfizer case cannot apply to the present case since there was no
compromise agreement in Pfizer where the dismissed employee waived her entitlement to backwages. 43

Finally, Wenphil claimed that the reliefs of reinstatement and backwages are only available to illegally dismissed
employees. A ruling that the respondents were still entitled to reinstatement pay notwithstanding the validity of their
dismissal, would amount to the court’s tolerance of an unjust and equitable situation. 44

The Court’s Ruling

We resolve to DENY the petition. An order of reinstatement is immediately executory even pending appeal. The
employer has the obligation to reinstate and pay the wages of the dismissed employee during the period of appeal
until reversal by the higher court.

Under Article 223 of the Labor Code, "the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal.
The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation, or at the option of the employer, merely reinstated in the payroll. The posting of a bond by
the employer shall not stay the execution for reinstatement."

The Court discussed reason behind this legal policy in Aris v. NLRC,  where it explained:
45

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating a
dismissed or separated employee, the law itself has laid down a compassionate policy which, once more, vivifies
and enhances the provisions of the 1987 Constitution on labor and the working-man. These provisions are the
quintessence of the aspirations of the workingman for recognition of his role in the social and economic life of the
nation, for the protection of his rights, and the promotion of his welfare… These duties and responsibilities of the
State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully
underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal
intensity. Labor is an indispensable partner for the nation's progress and stability. [emphasis ours]

Labor II – 1
Since the decision is immediately executory, it is the duty of the employer to comply with the order of reinstatement,
which can be done either actually or through payroll reinstatement. As provided under Article 223 of the Labor
Code, this immediately executory nature of an order of reinstatement is not affected by the existence of an ongoing
appeal. The employer has the duty to reinstate the employee in the interim period until a reversal is decreed by a
higher court or tribunal.

In the case of payroll reinstatement, even if the employer’s appeal turns the tide in its favor, the reinstated employee
has no duty to return or reimburse the salary he received during the period that the lower court or tribunal’s
governing decision was for the employee’s illegal dismissal.

Otherwise, the situation would run counter to the immediately executory nature of an order of reinstatement. The
case of Garcia v. Philippine Airlines  is enlightening on this point:
46

Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the
"refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a
dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries
received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable
decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll
reinstatement and simply find work elsewhere in the interim, if any is available.  Notably, the option of payroll
1âwphi1

reinstatement belongs to the employer, even if the employee is able and raring to return to work.

We see the situation discussed above to be present in the case before us as Wenphil observed the mandate of
Article 223 to immediately comply with the order of reinstatement by the LA. On October 29, 2001, while Wenphil’s
appeal with the NLRC was pending, it entered into a compromise agreement with the respondents. In this
agreement, Wenphil committed to reinstate the respondents in its payroll. However, the commitment came with a
condition: Wenphil stipulated that its obligation to pay the wages due to the respondents would cease if the decision
of the LA would be "modified, amended or reversed" by the NLRC. 47

Thus, when the NLRC rendered its decision on the appeal affirming the LA’s finding that the respondents were
illegally dismissed, but modifying the award of reinstatement to payment of separation pay, Wenphil stopped paying
the respondents’ wages.

The reinstatement salaries due to the respondents were, by their nature, payment of unworked backwages.
These were salaries due to the respondents because they had been prevented from working despite the LA and the
NLRC findings that they had been illegally dismissed.

We point out that reinstatement and backwages are two separate reliefs available to an illegally dismissed
employee. The normal consequences of a finding that an employee has been illegally dismissed are: first, that the
employee becomes entitled to reinstatement to his former position without loss of seniority rights; and second, the
payment of backwages covers the period running from his illegal dismissal up to his actual reinstatement.  These
48

two reliefs are not inconsistent with one another and the labor arbiter can award both simultaneously.

Moreover, the relief of separation pay may be granted in lieu of reinstatement but it cannot be a substitute for the
payment of backwages. In instances where reinstatement is no longer feasible because of strained relations
between the employee and the employer, separation pay should be granted. In effect, an illegally dismissed
employee should be entitled to either reinstatement – if viable, or separation pay if reinstatement is no longer be
viable, plus backwages in either instance.  The rationale for such policy of distinction was vividly explained in
49

Santos v. NLRC under these terms: 50

Though the grant of reinstatement commonly carries with it an award of backwages, the inappropriateness or non-
availability of one does not carry with it the inappropriateness or non-availability of the other. Separation pay was
awarded in favor of petitioner Lydia Santos because the NLRC found that her reinstatement was no longer feasible
or appropriate. As the term suggests, separation pay is the amount that an employee receives at the time of his
severance from the service and, as correctly noted by the Solicitor General in his Comment, is designed to provide

Labor II – 1
the employee with "the wherewithal during the period that he is looking for another employment." In the instant case,
the grant of separation pay was a substitute for immediate and continued re-employment with the private
respondent Bank. The grant of separation pay did not redress the injury that is intended to be relieved by the
second remedy of backwages, that is, the loss of earnings that would have accrued to the dismissed employee
during the period between dismissal and reinstatement. Put a little differently, payment of backwages is a form of
relief that restores the income that was lost by reason of unlawful dismissal; separation pay, in contrast, is oriented
towards the immediate future, the transitional period the dismissed employee must undergo before locating a
replacement job. It was grievous error amounting to grave abuse of discretion on the part of the NLRC to have
considered an award of separation pay as equivalent to the aggregate relief constituted by reinstatement plus
payment of backwages under Article 280 of the Labor Code. The grant of separation pay was a proper substitute
only for reinstatement; it could not be an adequate substitute both for reinstatement and for backwages. In effect,
the NLRC in its assailed decision failed to give to petitioner the full relief to which she was entitled under the statute.
[emphasis ours]

Apparently, when the NLRC changed the LA’s decision (specifically, the order to award separation pay in
lieu of reinstatement), Wenphil read this to mean to be the "modification" envisioned in the compromise
agreement, Wenphil likewise effectively concluded that separation pay and backwages are the same or are
interchangeable reliefs. This conclusion can be deduced from Wenphil’s insistence not to pay the
respondent’s remaining backwages under its erroneous reasoning that this was the effect of the NLRC’s
order to Wenphil to pay separation pay in lieu of reinstatement.

We emphasize that the basis for the payment of backwages is different from that of the award of separation pay.
Separation pay is granted where reinstatement is no longer advisable because of strained relations between the
employee and the employer. Backwages represent compensation that should have been earned but were not
collected because of the unjust dismissal. The basis for computing separation pay is usually the length of the
employee’s past service, while that for backwages is the actual period when the employee was unlawfully prevented
from working. 51

Had Wenphil really wanted to put a stop to the running of the period for the payment of the respondents’
backwages, then it should have immediately complied with the NLRC’s order to award the employees their
separation pay in lieu of reinstatement. This action would have immediately severed the employer-employee
relationship. However, the records are bereft of any evidence that Wenphil actually paid the respondents’
separation pay. Thus, the employer-employee relationship between Wenphil and the respondents never
ceased and the employment status remained pending and uncertain until the CA actually rendered its
decision that the respondents had not been illegally dismissed. In the context of the parties’ agreement, it
was only at this point that the payment of backwages should have stopped.

A compromise agreement should not be contrary to law, morals, good customs and public policy.

While it is true that a compromise agreement is binding between the parties and becomes the law between them,  it 52

is also a rule that to be valid, a compromise agreement must not be contrary to law, morals, good customs and
public policy. 53

In the present case, the parties’ compromise agreement simply provided that Wenphil’s obligation to pay the
respondents’ backwages shall end the moment the NLRC modifies, amends or reverses the illegal dismissal
decision of LA Bartolabac. On its face, there is nothing invalid with such stipulation. Indeed, had the NLRC reversed
the LA, the obligation to pay backwages would have stopped. The NLRC, however, did not decree a reversal of the
finding of illegal dismissal. In fact, it affirmed the illegal dismissal conclusion, confining itself merely to a modification
of the consequences of the illegal dismissal – from reinstatement to the payment of separation pay.

This "modification" of course we cannot accept; the option under the legal policy is solely limited to a ruling that the
respondents had not been illegally dismissed. Otherwise, we would be violating the Labor Code’s policy entitling
illegally dismissed employees to their right to backwages even during the period of appeal. As we held in the case of
Garcia v. Philippine Airlines:54

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on
appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during
Labor II – 1
the period of appeal until reversal by the higher court. It settles the view that the Labor Arbiter's order of
reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms
and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the
options in the alternative, employer must pay the employee’s salaries. [emphasis ours]

This ruling embodies a principle and policy of the law that cannot be watered down by any lesser agreement except
perhaps when backwages are already earned entitlements that the employee chooses to surrender for a valuable
consideration (and even then, the consideration must at least be equitable). This legal policy emphasizes, too, the
rule that separation pay cannot be a substitute for backwages but only for reinstatement. The award of separation
pay is not inconsistent with the payment of backwages. Thus, until a higher court’s or tribunal’s reversal of the
finding that an employee had been illegally dismissed, the employee would be entitled to receive his reinstatement
salary or backwages during the period of appeal until such reversal. This is in line with the Labor Code’s policy that
an order of reinstatement, which can either be actual or through the payroll, is immediately executory and is not
affected by the period of appeal.

Period for Computation of Backwages

The records show that the inconsistency between the labor arbitration rulings and the CA’s ruling was on the period
for the computation of such backwages and not on whether the respondents were still entitled to such backwages
during the period of appeal until the reversal of the finding of illegal dismissal.

According to the LA, whose ruling the NLRC affirmed, the period for computation should be from February 15, 2002
until November 8, 2002 since the NLRC’s decision which affirmed the LA’s finding of illegal dismissal became final
and executory on November 8, 2002. The LA started the counting of the period on February 15, 2002 since that was
the day when Wenphil last paid the respondents’ backwages.

On the other hand, the CA, in setting aside the NLRC’s rulings, relied on the case of Pfizer v. Velasco where we
ruled that the backwages of the dismissed employee should be granted during the period of appeal until reversal by
a higher court. Since the first CA decision which found that the respondents had not been illegally dismissed was
promulgated on August 27, 2003, then the reversal by the higher court was effectively made on August 27, 2003.

As against this view, the respondents argued that the period for payment of their backwages should end on
February 14, 2007 since the SC decision in G.R. No. 162447 which affirmed the CA’s findings that the respondents
had not been legally dismissed became final and executory on February 15, 2007.

Among these views, the commanding one is the rule in Pfizer, which merely echoes the rulings we made in the
cases of Roquero v. Philippine Airlines  and Garcia v. Philippine Airlines  that the period for computing the
55 56

backwages due to the respondents during the period of appeal should end on the date that a higher court
reversed the labor arbitration ruling of illegal dismissal. In this case, the higher court which first reversed
the NLRC’s ruling was not the SC but rather the CA. In this light, the CA was correct when it found that that
the period of computation should end on August 27, 2003. The date when the SC’s decision became final
and executory need not matter as the rule in Roquero, Garcia and Pfizer merely referred to the date of
reversal, not the date of the ultimate finality of such reversal.

As a last minor detail, we do not agree with the CA that the date of computation should start on February 15, 2002.
Rather, it should be on February 16, 2002. The respondents themselves admitted in their motion for computation
and issuance of writ of execution that the last date when they were paid their backwages was on February 15, 2002.
To start the computation on the same date would result to a duplication of wages for this day; thus, computation
should start on the following date - February 16, 2002.

WHEREFORE, in light of these considerations, we hereby DENY the petition. The Court of Appeals' decision dated
August 31, 2012 and resolution dated June 20, 2013, which annulled and set aside the March 26, 2010 decision
and September 15, 2010 resolution of the NLRC, are hereby AFFIRMED with MODIFICATION. The period for the
computation of backwages of respondents Almer R. Abing and Anabelle M. Tuazon should be from February 16,
2002 until August 27, 2003, when the Court of Appeals promulgated its decision reversing the NLRC' s finding of
illegal dismissal. No costs.

Labor II – 1
Labor II – 1
 100.) G.R. No. 220506, January 18, 2017

C.I.C.M. MISSION SEMINARIES (MARYHURST, MARYHEIGHTS, MARYSHORE AND

MARYHILL) SCHOOL OF THEOLOGY, INC., FR. ROMEO NIMEZ, CICM, Petitioners, v. MARIA
VERONICA C. PEREZ, Respondent.

DECISION

MENDOZA, J.:

In this petition for review on certiorari1 under Rule 45 of the Rules of Court, petitioner C.I.C.M.
Mission Seminaries (Maryhurst, Maryheights, Maryshore and Maryhill) School of Theology, Inc., and
Fr. Romeo Nimez, CICM (petitioners),  seek the review of the May 27, 2015 Decision2 and September
7, 2015 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP. No. 137132.

In the assailed rulings, the CA dismissed the petitioners' petition for certiorari  filed under Rule 65 of
the Rules of Court questioning the September 8, 2014 Resolution of the National Labor Relations
Commission (NLRC)  in LER Case No. 07-205-14, which affirmed the July 10, 2014 Order of the Labor
Arbiter (LA)  in NLRC Case No. NCR-12-14242-07, issued in favor of Maria Veronica C.
Perez (respondent).

The Antecedents

This controversy is an offshoot of an illegal dismissal case filed by the respondent against the
petitioners. In its June 16, 2008 Decision, the LA recognized respondent's right to receive from the
petitioners backwages and separation pay in lieu of reinstatement. Thus, it ordered the petitioners to
pay respondent the aggregate amount of P286,670.58. The LA decision was affirmed by the NLRC, by
the CA and by this Court in G.R. No. 200490.

The decision became final and executory on October 4, 2012, as evidenced by the Entry of Judgment.
Consequently, respondent moved for the issuance of a writ of execution. The petitioners opposed and
moved for the issuance of a certificate of satisfaction of judgment, alleging that their obligation had
been satisfied by the release of the cash bond in the amount of P272,337.05 to respondent.

In its July 10, 2014 Order, the LA ruled that the cash bond posted by the petitioners was insufficient
to satisfy their obligation. Thus, it ordered the issuance of a writ of execution, to wit:
chanRoblesvirtualLawlibrary

After evaluation, this Office deems it proper to grant [respondent's] Motion for Issuance of Writ of
Execution. The fact that [petitioner CICM's] cash bond has been released to respondent in the
amount of P272,337.05 does not mean full satisfaction of the award as petitioner CICM insists.

The Decision dated 16 June 200[8] which was affirmed by the Commission, the Court of Appeals and
the Supreme Court specifically states that [respondent] is entitled to backwages and separation pay
until the finality of the Decision. Further, the Resolution of the Court of Appeals dated February 2,
2012 stressed the need to recompute the monetary award specifically with regard to the payment of
backwages, separation pay and attorney's fees, so as to update the total monetary award to which
respondent is entitled in accordance with prevailing laws and jurisprudence.

This Office therefore ordered the recomputation of complainant's award of additional backwages from
07 June 2008 until 04 October 2012, the finality of the Supreme Court decision, and additional
separation pay also until 04 October 2012. The total award therefore is P1,847,088.89. From this
amount should be deducted the amount respondent received at P272,337.05. Thus, the additional
backwages and separation pay due is P1,575,751.84. Since there is no more legal hindrance in the
enforcement of the judgment; this Office orders the issuance of the writ of execution.4
Labor II – 1
Undaunted, the petitioners elevated an appeal before the NLRC. Nevertheless, in its September 8,
2014 Decision, the NLRC affirmed the ruling of the LA.

Aggrieved, the petitioners filed a petition for certiorari  with the CA.

Meanwhile, the LA issued an undated writ of execution addressed to the Sheriff, who, in tum,
implemented it by garnishing upon CICM's bank deposit with BPI Family Savings Bank. CICM moved
for the urgent quashal of the said writ and for the garnishment to be lifted.

On January 14, 2015, the LA issued an order lifting the notice of garnishment made on CICM's bank
accounts. Nonetheless, on April 13, 2015, the LA still ordered the issuance of a writ of execution to
enforce the balance of the judgment award. The dispositive portion reads: chanRoblesvirtualLawlibrary

WHEREFORE, premises considered, the Urgent Motion to Quash Writ of Execution is granted. The
Writ of Execution dated 3 October 2014 is hereby ordered quashed effective immediately. The Motion
to Lift Garnishment of CICM Missionaries, Inc.'s account with BPI Family Savings Bank will be lifted
upon release of its bond covered by BPI Check No. 0000704053 in the amount of P266,670.58 (O.R.
No. 6742637) to [respondent].

Let a Writ of Execution be issued against [petitioners] to enforce the balance of the judgment award.5

On May 27, 2015, the CA dismissed the petition filed by the petitioners. The petitioners moved for
reconsideration. In its September 7, 2015 Resolution, the CA denied their motion.

Hence, this petition.

The petitioners, therefore, ask this Court to determine "what should be the legal basis for
the computation of the backwages and separation pay of an illegally dismissed employee
in a case where reinstatement was not ordered despite appeals made by said employee
which [delayed] the final resolution of the issue on reinstatement." 6

The petitioners challenge the affirmation by the CA and NLRC of the July 10, 2014 Order of the LA,
which recomputed respondent's award of additional backwages and separation pay until October 4,
2012, the finality of this Court's decision in G.R. No. 200490. They argue that the computation of
backwages and separation pay of respondent should be only up to June 16, 2008, the date when the
LA rendered her decision in the main case and which was also the date when reinstatement was
refused. They contend that although the cases cited by the CA - Surima v. NLRC,7Gaco v.
NLRC,8Oscar Ledesma and Company v. NLRC,9Labor v. NLRC,  10Rasonable v.
NLRC  11 and Bustamante v. NLRC,12 commonly held that the computation of the separation pay and
backwages shall be up to the time of finality of this Court's decision, the same were not applicable to
their case. They point varying factual antecedents and claim that in the cases mentioned, the
employers were the ones who appealed, thereby delaying the resolution of the illegal dismissal cases
before the LA. Thus, the increase in the awards should necessarily be shouldered by the employer.
This circumstance, however, is not present in this case. In other words, they posit that if the
employer caused the delay in satisfying the judgment award, the computation should be up to the
finality of the case. If it were the employee's fault, as in this case, the computation should only run
until the time actual reinstatement is no longer possible nor practicable.13

In her Comment,14 respondent argued that the recomputation of the total monetary award should be
until October 4, 2012 (the date when the main case became final); and that her appeal of the main
case should not prejudice her as she had the right to file the same.

Labor II – 1
In their Reply,15 the petitioners contended that the computation made by the LA in the main case,
which has become final and executory, could no longer be disturbed following the doctrine of
immutability of judgment.

The Court's Ruling

The Court finds no merit in the petition.

To begin with, the petitioners failed to append the required affidavit of service. The rule is, such
affidavit is essential to due process and the orderly administration of justice even if it is used merely
as proof that service has been made on the other party.16 The utter disregard of this requirement as
held in a catena of cases cannot be justified by harking to substantial justice and the policy of liberal
construction of the Rules. Indeed, technical rules of procedure are not meant to frustrate the ends of
justice. Rather, they serve to effect the proper and orderly disposition of cases and, thus, effectively
prevent the clogging of court dockets.17 Thus, in Ferrer v. Villanueva,18 the Court held that
petitioner's failure to append the proof of service to his petition for certiorari was a fatal defect.

Hence, the denial of this case is in order.

For the guidance of the bench and the bar, however, the Court opts to also delve into the merits of
the case.

As a precept, the Court's duty in a Rule 45 petition, assailing the decision of the CA in a labor case
elevated to it through a Rule 65 petition, is limited only to the determination of whether the CA
committed an error in judgment in declaring the absence or existence, as the case may be, of grave
abuse of discretion on the part of the NLRC.19

As a consequence, the Court shall examine only whether the CA erred in not finding grave abuse of
discretion when the NLRC affirmed the LA's findings that the separation pay in lieu of reinstatement
as well as backwages due to respondent should be recomputed until the finality of the Court's
decision in G.R. No. 200490, despite the fact that the delay in the resolution of the said case was
brought about by respondent herself.

On this point, the Court rules in the negative.

Grave abuse of discretion, which has been defined as a capricious and whimsical exercise of
judgment so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to
perform a duty enjoined by law,20 requires proof that the CA committed errors such that its decision
was not made in contemplation of law. The burden of proof rests upon the party who asserts.21

The petitioners, however, failed to carry out such burden.

The decision of the CA is based on long standing jurisprudence that in the event the aspect
of reinstatement is disputed, backwages, including separation pay, shall be computed from
the time of dismissal until the finality of the decision ordering the separation pay. In Gaco
v. NLRC,22 it was ruled that with respect to the payment of backwages and separation pay in lieu of
reinstatement of an illegally dismissed employee, the period shall be reckoned from the time
compensation was withheld up to the finality of this Court's decision. This was reiterated in Surima v.
NLRC  23 and Session Delights Ice Cream and Fast Foods v. CA. 24

The reason for this was explained in Bani Rural Bank, Inc. v. De Guzman. 25  When there is an order
of separation pay (in lieu of reinstatement or when the reinstatement aspect is waived or
subsequently ordered in light of a supervening event making the award of reinstatement no longer
possible), the employment relationship is terminated only upon the finality of the decision ordering
Labor II – 1
the separation pay. The finality of the decision cuts-off the employment relationship and represents
the final settlement of the rights and obligations of the parties against each other. Hence, backwages
no longer accumulate upon the finality of the decision ordering the payment of separation pay
because the employee is no longer entitled to any compensation from the employer by reason of the
severance of his employment. One cannot, therefore, attribute patent error on the part of the CA
when it merely affirmed the NLRC's conclusion, which was clearly based on jurisprudence.

Plainly, it does not matter if the delay caused by an appeal was brought about by the employer or by
the employee. The rule is, if the LA's decision, which granted separation pay in lieu of reinstatement,
is appealed by any party, the employer-employee relationship subsists and until such time when
decision becomes final and executory, the employee is entitled to all the monetary awards awarded
by the LA.

In this case, respondent remained an employee of the petitioners pending her partial appeal. Her
employment was only severed when this Court, in G.R. No. 200490, affirmed with finality the rulings
of the CA and the labor tribunals declaring her right to separation pay instead of actual
reinstatement. Accordingly, she is entitled to have her backwages and separation pay computed until
October 4, 2012, the date when the judgment of this Court became final and executory, as certified
by the Clerk of Court, per the Entry of Judgment in G.R. No. 200490.

The Court would not have expected the CA and the NLRC to rule contrary to the above
pronouncements. If it were otherwise, all employees who are similarly situated will be forced to
relinquish early on their fight for reinstatement, a remedy, which the law prefers over severance of
employment relation. Furthermore, to favor the petitioners' position is nothing short of a derogation
of the State's policy to protect the rights of workers and their welfare under Article II, Section 8 of
the 1987 Constitution.26

The petitioners, nonetheless, claim that it was not their fault why the amounts due ballooned to the
present level. They are mistaken. Suffice it to state that had they not illegally dismissed respondent,
they will not be where they are today. They took the risk and must suffer the consequences.

Finally, the Court disagrees with the petitioners' assertion that a recomputation would violate the
doctrine of immutability of judgment. It has been settled that no essential change is made by a
recomputation as this step is a necessary consequence that flows from the nature of the illegality of
dismissal declared in that decision. By the nature of an illegal dismissal case, the reliefs continue to
add on until full satisfaction thereof. The recomputation of the awards stemming from an illegal
dismissal case does not constitute an alteration or amendment of the final decision being
implemented. The illegal dismissal ruling stands; only the computation of the monetary
consequences of the dismissal is affected and this is not a violation of the principle of immutability of
final judgments.27

WHEREFORE, the petition is DENIED. The Temporary Restraining Order issued by this Court on

February 3, 2016 is hereby LIFTED.

Labor II – 1