G.R. No. 85985. August 13, 1993.

PHILIPPINE AIRLINES, INC. (PAL), petitioner, vs. NATIONAL LABOR

RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA, and
PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), respondents.
Labor Laws; Company rules on discipline; Management prerogative not boundless.—
PAL asserts that when it revised its Code on March 15, 1985, there was no law which
mandated the sharing of responsibility therefor between employer and employee. Indeed,
it was only on March 2, 1989, with the approval of Republic Act No. 6715, amending
Article 211 of the Labor Code, that the law explicitly considered it a State policy “(t)o
ensure the participation of workers in decision and policy-making processes affecting
their rights, duties and welfare.” However, even in the absence of said clear provision of
law, the exercise of management prerogatives was never considered boundless. Thus, in
Cruz vs. Medina (177 SCRA 565 [1989]), it was held that management’s prerogatives
must be without abuse of discretion.

Same; Same; Same; Line drawn between policies which are purely business-oriented and
those which affect rights of employees.—A close scrutiny of the objectionable provisions
of the Code reveals that they are not purely business-oriented nor do they concern the
management aspect of the business of the company as in the San Miguel case. The
provisions of the Code clearly have repercusions on the employees’ right to security of
tenure. The implementation of the provisions may result in the deprivation of an
employee’s means of livelihood which, as correctly pointed out by the NLRC, is a
property right (Callanta vs. Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view
of these aspects of the case which border on infringement of constitutional rights, we
must uphold the constitutional requirements for the protection of labor and the promotion
of social justice, for these factors, according to Justice Isagani Cruz, tilt “the scales of
justice when there is doubt, in favor of the worker” (Employees Association of the
Philippine American Life Insurance Company vs. NLRC, 199 SCRA 628 [1991] 635).
Verily, a line must be drawn between management prerogatives regarding business
operations per se and those which affect the rights of the employees. In treating the latter,
management should see to it that its employees are at least properly informed of its
decisions or modes of action. xxx xxx.

Same; Same; Same; Employee’s right to participate in policymaking upheld.—Indeed,

industrial peace cannot be achieved if the employees are denied their just participation in
the discussion of matters affecting their rights. Thus, even before Article 211 of the Labor
Code (P.D. 442) was amended by Republic Act No. 6715, it was already declared a
policy of the State: “(d) To promote the enlightenment of workers concerning their rights
and obligations . . . as employees.” This was, of course, amplified by Republic Act No.
6715 when it decreed the “participation of workers in decision and policy making
processes affecting their rights, duties and welfare.” PAL’s position that it cannot be
saddled with the “obligation” of sharing management prerogatives as during the
formulation of the Code, Republic Act No. 6715 had not yet been enacted (Petitioner’s
Memorandum, p. 44; Rollo,p. 212), cannot thus be sustained. While such “obligation”
was not yet founded in law when the Code was formulated, the attainment of a
harmonious labor-management relationship and the then already existing state policy of
enlightening workers concerning their rights as employees demand no less than the
observance of transparency in managerial moves affecting employees’ rights Philippine
Airlines, Inc. vs. NLRC, 225 SCRA 301, G.R. No. 85985 August 13, 1993

G.R. No. 53515. February 8, 1989.*

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner, vs. HON.
BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION,
respondents.
Labor Law; Labor Relations; Unfair Labor Practice; The free will of management to
conduct its own business affairs to achieve its purpose cannot be denied.—Public
respondent was correct in holding that the CDS is a valid exercise of management
prerogatives: “Except as limited by special laws, an employer is free to regulate,
according to his own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and recall
of work. x x x (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs.
CIR, 21 SCRA 226, 235.)” (Perfecto V. Hernandez, Labor Relations Law, 1985 Ed., p.
44.) Every business enterprise endeavors to increase its profits. In the process, it may
adopt or devise means designed towards that goal. In Abott Laboratories vs. NLRC, 154
SCRA 713, We ruled: x x x Even as the law is solicitous of the welfare of the employees,
it must also protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business affairs to achieve
its purpose cannot be denied.” So long as a company’s management prerogatives 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, this Court will uphold them (LVN Pictures Workers vs. LVN, 35
SCRA 147; Phil. American Embroideries vs. Embroidery and Garment Workers, 26
SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Brewery Sales
Force Union (PTGWO) vs. Ople, 170 SCRA 25, G.R. No. 53515 February 8, 1989
G.R. No. 89920. October 18, 1990.*

UNIVERSITY OF STO. TOMAS, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION, UST FACULTY UNION, respondents.
Labor Relations; Strikes; Reinstatement; Giving of substantially equivalent academic
assignments to dismissed faculty members, without actual teaching loads, cannot be
considered a reinstatement under the same terms and conditions prevailing before the
strike within the context of Art. 263(g) of the Labor Code.—Clearly, the giving of
substantially equivalent academic assignments, without actual teaching loads, cannot be
considered a reinstatement under the same terms and conditions prevailing before the
strike. Within the context of Article 263(g), the phrase "under the same terms and
conditions" contemplates actual reinstatement or the return of actual teaching loads to the
dismissed faculty members. There are academic assignments such as the research and
writing of treatises for publication or fulltime laboratory work leading to exciting
discoveries which professors yearn for as badges of honor and achievement. The
assignments given to the reinstated faculty members do not fall under such desirable
categories. x x x The grant of substantially equivalent academic assignments of the nature
assigned by the petitioner would evidently alter the existing status quo since the
temporarily reinstated teachers

will not be given their usual teaching loads. In fact, the grant thereof aggravated the
present dispute since the teachers who were assigned substantially equivalent academic
assignments refused to accept and handle what they felt were degrading or unbecoming
assignments, in turn prompting the petitioner University to withhold their salaries. (Rollo,
p. 109) We therefore hold that the public respondent NLRC did not commit grave abuse
of discretion when it ruled that the petitioner should "cease and desist from offering the
aforementioned faculty members substantially equivalent academic assignments as this is
not compliance in good faith with the order of the Secretary of Labor and Employment."

Same; Same; Same; Return to Work Order; A return-to-work order is immediately

effective and executory despite the filing of a motion for reconsideration by the
petitioners.—The petitioner's stand is unmeritorious. A return-to-work order is
immediately effective and executory despite the filing of a motion for reconsideration by
the petitioner. As pointed out by the Court in Philippine Air Lines Employees
Association (PALEA) v. Philippine Air Lines, Inc. (38 SCRA 372 [1971]): "The very
nature of a return-to-work order issued in a certified case lends itself to no other
construction. The certification attests to the urgency of the matter affecting as it does an
industry indispensable to the national interest. The order is issued in the exercise of the
court's compulsory power of arbitration, and therefore must be obeyed until set aside. To
say that its effectivity must wait affirmance in a motion for reconsideration is not only to
emasculate it but indeed to defeat its import, for by then the deadline fixed for the return-
to-work would, in the ordinary course, have already passed and hence can no longer be
affirmed insofar as the time element is concerned."

Same; National Labor Relations Commission; Findings of quasijudicial agencies like the
NLRC are generally accorded not only respect but even finality, if such findings are
supported by substantial evidence.—We likewise affirm the NLRC's finding that the
dismissed teachers presented themselves for reinstatement on July 13, 1989 since the
factual findings of quasi-judicial agencies like the NLRC are generally accorded not only
respect but even finality if such findings are supported by substantial evidence. (Mamerto
v. Inciong, 118 SCRA 265 [1982]; Baby Bus, Inc. v. Minister of Labor, 158 SCRA 221
[1988]; Packaging Products Corporation v. National Labor Relations Commission, 152
SCRA 210 [1987]; Talisay Employees' and Laborers Association (TELA) v. Court of
Industrial Relations, 143 SCRA 213 [1986]). There is no showing that such substantial
evidence is not present.

Same; Employer-Employee Relationship; Management prerogatives are not absolute

prerogatives, but are subject to limitations found in law, a collective bargaining
agreement, or general principles of fair play and justice.—With respect to the fourth
assignment of error, the petitioner expostulates that as employer, it has the sole and
exclusive right and prerogative to determine the nature and kind of work of its employees
and to control and manage its own operations. Thus, it objects to the NLRC's act of
substituting its judgment for that of the petitioner in the conduct of its affairs and
operations. (Rollo, pp. 2324) Again, we cannot sustain the petitioner's contention. The
hiring, firing, transfer, demotion and promotion of employees are traditionally identified
as management prerogatives. However, these are not absolute prerogatives. They are
subject to limitation found in law, a collective bargaining agreement, or general
principles of fair play and justice. (Abbott Laboratories [Phil.] Inc. v. NLRC, 154 SCRA
713 [1987]) Article 263(g) is one such limitation provided by law. To the extent that Art.
263(g) calls for the admission of all workers under the same terms and conditions
prevailing before the strike, the petitioner University is restricted from exercising its
generally unbounded right to transfer or reassign its employees. The public respondent
NLRC is not substituting its own judgment for that of the petitioner in the conduct of its
own affairs and operations; it is merely complying with the mandate of the law.
University of Sto. Tomas vs. NLRC, 190 SCRA 758, G.R. No. 89920 October 18, 1990
MANOLO A. PEÑAFLOR, petitioner, vs. OUTDOOR CLOTHING
MANUFACTURING CORPORATION, NATHANIEL T. SYFU, President,
MEDYLENE M. DEMOGENA, Finance Manager, and PAUL U. LEE, Chairman,
respondents.
Remedial Law; Appeals; Rule that a Rule 45 petition deals only with legal issues is not
an absolute rule; It admits of exceptions; The conflicting factual findings below are not
binding on the Court which retain its authority to pass on the evidence presented and
draw conclusions therefrom.—We see no merit in this argument as the rule that a Rule 45
petition deals only with legal issues is not an absolute rule; it admits of exceptions. In the
labor law setting, we wade into factual issues when conflict of factual findings exists
among the labor arbiter, the NLRC, and the CA. This is the exact situation that obtains in
the present case since the labor arbiter found facts supporting the conclusion that there
had been constructive dismissal, while the NLRC’s and the CA’s factual findings
contradicted the labor arbiter’s findings. Under this situation, the conflicting factual
findings below are not binding on us, and we retain the authority to pass on the evidence
presented and draw conclusions therefrom.

Labor Law; Termination of Employment; Evidence; In employee termination disputes,

the employer bears the burden of proving that the employee’s dismissal was for just and
valid cause.—The first is the settled rule that in employee termination disputes, the
employer bears the burden of proving that the employee’s dismissal was for just and valid
cause. That Peñaflor did indeed file a letter of resignation does not help the company’s
case as, other than the fact of resignation, the company must still prove that the employee
voluntarily resigned. There can be no valid resignation where the act was made under
compulsion or under circumstances approximating compulsion, such as when an
employee’s act of handing in his resignation was a reaction to circumstances leaving him
no alternative but to resign. In sum, the evidence does not support the existence of
voluntariness in Peñaflor’s resignation.

Same; Same; Same; The principle that all doubts in the interpretation and implementation
of the Labor Code should be interpreted in favor of the workingman has been extended
by jurisprudence to cover doubts in the evidence presented by the employer and the
employee.—Another basic principle is that expressed in Article 4 of the Labor Code—
that all doubts in the interpretation and implementation of the Labor Code should be
interpreted in favor of the workingman. This principle has been extended by
jurisprudence to cover doubts in the evidence presented by the employer and the
employee. As shown above, Peñaflor has, at very least, shown serious doubts about the
merits of the company’s case, particularly in the appreciation of the clinching evidence
on which the NLRC and CA decisions were based. In such contest of evidence, the cited
Article 4 compels us to rule in Peñaflor’s favor. Peñaflor vs. Outdoor Clothing
Manufacturing Corporation, 610 SCRA 497, G.R. No. 177114 January 21, 2010
SHS PERFORATED MATERIALS, INC., WINFRIED HARTMANNSHENN, and
HINRICH JOHANN SCHUMACHER, petitioners, vs. MANUEL F. DIAZ, respondent.
Labor Law; Labor Standards; Management Prerogative; Management Prerogative
Explained; Although management prerogative refers to “the right to regulate all aspects
of employment,” it cannot be understood to include the right to temporarily withhold
salary/wages without the consent of the employee; Any withholding of an employee’s
wages by an employer may only be allowed in the form of wage deductions under the
circumstances provided in Article 113 of the Labor Code.—Management prerogative
refers “to the right of an employer to regulate all aspects of employment, such as the
freedom to prescribe work assignments, working methods, processes to be followed,
regulation regarding transfer of employees, supervision of their work, lay-off and
discipline, and dismissal and recall of work.” Although management prerogative refers to
“the right to regulate all aspects of employment,” it cannot be understood to include the
right to temporarily withhold salary/wages without the consent of the employee. To
sanction such an interpretation would be contrary to Article 116 of the Labor Code, x x x
Any withholding of an employee’s wages by an employer may only be allowed in the
form of wage deductions under the circumstances provided in Article 113 of the Labor
Code.

Same; Constructive Dismissals; 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.—The Court, however, agrees with
the LA and the CA that respondent was forced to resign and was, thus, constructively
dismissed. In Duldulao v. Court of Appeals, 517 SCRA 191 (2007), it was written: 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.

Same; Same; Court agrees with the Labor Arbiter (LA) and the Court of Appeals (CA)
that the unlawful withholding of respondent’s salary amounts to constructive dismissal.—
In this case, the withholding of respondent’s salary does not fall under any of the
circumstances provided under Article 113. Neither was it established with certainty that
respondent did not work from November 16 to November 30, 2005. Hence, the Court
agrees with the LA and the CA that the unlawful withholding of respondent’s salary
amounts to constructive dismissal.

Same; Probationary Employees; Security of Tenure; Probationary employees cannot be

dismissed except for cause or for failure to qualify as regular employees.—Respondent
was constructively dismissed and, therefore, illegally dismissed. Although respondent
was a probationary employee, he was still entitled to security of tenure. Section 3 (2),
Article 13, of the Constitution guarantees the right of all workers to security of tenure. In
using the expression “all workers,” the Constitution puts no distinction between a
probationary and a permanent or regular employee. This means that probationary
employees cannot be dismissed except for cause or for failure to qualify as regular
employees.
Same; Same; Same; Probationary employees who are unjustly dismissed during the
probationary period are entitled to reinstatement and payment of full backwages and
other benefits and privileges from the time they were dismissed up to their actual
reinstatement.—This Court has held that probationary employees who are unjustly
dismissed during the probationary period are entitled to reinstatement and payment of full
backwages and other benefits and privileges from the time they were dismissed up to
their actual reinstatement. Respondent is, thus, entitled to reinstatement without loss of
seniority rights and other privileges as well as to full backwages, inclusive of allowances,
and other benefits or their monetary equivalent computed from the time his compensation
was withheld up to the time of actual reinstatement.
Same; Same; Same; Doctrine of Strained Relations; 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.—Respondent’s
reinstatement, however, is no longer feasible as antagonism has caused a severe strain in
their working relationship. Under the doctrine of strained relations, the payment of
separation pay is considered an acceptable alternative to reinstatement when the latter
option is no longer desirable or viable. Payment liberates the employee from what could
be a highly oppressive work environment, and at the same time releases the employer
from the obligation of keeping in its employ a worker it no longer trusts. Therefore, a
more equitable disposition would be an award of separation pay equivalent to at least one
month pay, in addition to his full backwages, allowances and other benefits.

Same; Corporate Liability; Corporate directors and officers are only solidarily liable with
the corporation for termination of employment of corporate employees if effected with
malice or in bad faith.—With respect to the personal liability of Hartmannshenn and
Schumacher, this Court has held that corporate directors and officers are only solidarily
liable with the corporation for termination of employment of corporate employees if
effected with malice or in bad faith. Bad faith does not connote bad judgment or
negligence; it imports dishonest purpose or some moral obliquity and conscious doing of
wrong; it means breach of unknown duty through some motive or interest or ill will; it
partakes of the nature of fraud. To sustain such a finding, there should be evidence on
record that an officer or director acted maliciously or in bad faith in terminating the
employee. SHS Perforated Materials, Inc. vs. Diaz, 633 SCRA 258, G.R. No. 185814
October 13, 2010
G.R. No. 175365. October 23, 2013.*
CANDIDO S. GEMINA, JR., petitioner, vs. BANKWISE, INC. (Thrift Bank), LAZARO
LL. MADARA, PERFECTO M. PASCUA and OSMENIO R. GALAPATE, respondents.

Labor Law; Termination of Employment; Constructive Dismissal; There is constructive

dismissal when there is cessation of work, because ‘continued employment is rendered
impossible, unreasonable or unlikely, as an offer involving a demotion in rank or a
diminution in pay’ and other benefits.—There is constructive dismissal when “there is
cessation of work, because ‘continued employment is rendered impossible, unreasonable
or unlikely, as an offer involving a demotion in rank or a diminution in pay’ and other
benefits. Aptly called a dismissal in disguise or an act amounting to dismissal but made to
appear as if it were not, constructive dismissal may, likewise, exist if an act of clear
discrimination, insensibility, or disdain by an employer becomes so unbearable on the
part of the employee that it could foreclose any choice by him except to forego his
continued employment.” As correctly held by the NLRC and the CA, Gemina’s claim of
constructive dismissal is not supported by the facts of the case. Both tribunals ruled that
the circumstances mentioned by Gemina do not partake of discriminatory acts calculated
to force him to leave employment. The acts complained of merely pertain to the
legitimate exercise of management prerogatives.

Remedial Law; Civil Procedure; Appeals; 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.—“[S]ettled 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.” “The factual findings
of the NLRC, when affirmed by the CA, are generally conclusive on this Court.”  A close
scrutiny of the facts of the case will bear out that Gemina indeed failed to state
circumstances substantiating his claim of constructive dismissal. To begin with, he does
not claim to have suffered a demotion in rank or diminution in pay or other benefits.
What he claims is that he had been subjected to several acts of harassment by some of the
officers of Bankwise by way of (1) asking him to take a forced leave of absence, (2)
demanding for the return of his service vehicle, and (3) delaying the release of his salaries
and allowances in order to compel him to quit employment.

Labor Law; Termination of Employment; Burden of Proof; Before the employer must
bear the burden of proving that the dismissal was legal, the employee must first establish
by substantial evidence the fact of his dismissal from service.—It is a well-settled rule,
however, that before the employer must bear the burden of proving that the dismissal was
legal, the employee must first establish by substantial evidence the fact of his dismissal
from service. Bare allegations of constructive dismissal, when uncorroborated by the
evidence on record, cannot be given credence.
Same; Same; Constructive Dismissal; The Court also finds Bankwise’s order to return the
service vehicle assigned to Gemina inadequate to warrant his claim of constructive
dismissal; It remains the property of the Bank and therefore may be disposed of or
utilized by the company in the manner that it deems more beneficial for its interests; The
employer’s right to conduct the affairs of its business, according to its own discretion and
judgment, is well-recognized.—The Court also finds Bankwise’s order to return the
service vehicle assigned to Gemina inadequate to warrant his claim of constructive
dismissal. It bears noting that the service vehicle was only temporarily assigned for
Gemina’s use. Nonetheless, it remains the property of the Bank and therefore may be
disposed of or utilized by the company in the manner that it deems more beneficial for its
interests. This is plainly an exercise of management prerogative. The employer’s right to
conduct the affairs of its business, according to its own discretion and judgment, is well-
recognized. An employer has a free reign and enjoys wide latitude of discretion to
regulate all aspects of employment and the only criterion to guide the exercise of its
management prerogative is that the policies, rules and regulations on work-related
activities of the employees must always be fair and reasonable. Gemina, Jr. vs. Bankwise,
Inc. (Thrift Bank), 708 SCRA 403, G.R. No. 175365 October 23, 2013
THE COCA-COLA EXPORT CORPORATION, petitioner, vs. CLARITA P.
GACAYAN, respondent.
Labor Law; Termination of Employment; Due Process; The Labor Code mandates that
before an employer may validly dismiss an employee from the service, the requirement of
substantial and procedural due process must be complied with.—The Labor Code
mandates that before an employer may validly dismiss an employee from the service, the
requirement of substantial and procedural due process must be complied with. Under the
requirement of substantial due process, the grounds for termination of employment must
be based on just or authorized causes. Article 282 of the Labor Code enumerates the just
causes for the termination of employment.

Same; Same; In termination cases, the burden of proof rests on the employer to show that
the dismissal was for just cause.—In termination cases, the burden of proof rests on the
employer to show that the dismissal was for just cause. Otherwise, an employee who is
illegally dismissed “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.”

Same; Same; It is important to note that the term “trust and confidence” is restricted to
managerial employees.—At the outset, it is important to note that the term “trust and
confidence” is restricted to managerial employees. In Samson v. National Labor
Relations Commission, the Court, citing Section 2(b), Rule I, Book III of the Omnibus
Rules Implementing the Labor Code, enumerated the conditions for one to be properly
considered a managerial employee: (1) Their primary duty consists of the management of
the establishment in which they are employed or of a department or sub-division thereof;
(2) They customarily and regularly direct the work of two or more employees therein;
[and] (3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the promotion or
any other change of status of other employees are given particular weight.

Same; Same; In Nokom v. National Labor Relations Commission, 336 SCRA 97, 111-
112 (2000), the Court set the guidelines for the application of the doctrine of loss of
confidence.—In Nokom v. National Labor Relations Commission, 336 SCRA 97, 111-
112 (2000), this Court set the guidelines for the application of the doctrine of loss of
confidence—(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, the basis for terminating the employment of respondent was for gross
violation of the company’s rules and regulations, as specified in the termination letter
dated April 4, 1998.

Same; Same; Loss of Trust and Confidence; It bears emphasizing that the right of an
employer to dismiss its employees on the ground of loss of trust and confidence must not
be exercised arbitrarily. For loss of trust and confidence to be a valid ground for
dismissal, it must be substantial and founded on clearly established facts.—It bears
emphasizing that the right of an employer to dismiss its employees on the ground of loss
of trust and confidence must not be exercised arbitrarily. For loss of trust and confidence
to be a valid ground for dismissal, it must be substantial and founded on clearly
established facts. Loss of confidence must not be used as a subterfuge for causes which
are improper, illegal or unjustified; it must be genuine, not a mere afterthought, to justify
earlier action taken in bad faith. Because of its subjective nature, this Court has been very
scrutinizing in cases of dismissal based on loss of trust and confidence because the same
can easily be concocted by an abusive employer. Thus, when the breach of trust or loss of
confidence theorized upon is not borne by clearly established facts, as in the instant case,
such dismissal on the ground of loss and confidence cannot be countenanced.

Same; Same; Same; Serious Misconduct; It is well to stress that in order to constitute
serious misconduct which will warrant the dismissal of an employee, 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 done with
wrongful intent.—The alleged infractions of respondent could hardly be considered
serious misconduct. It is well to stress that in order to constitute serious misconduct
which will warrant the dismissal of an employee, 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 done with wrongful intent.
Such is, however, lacking in the instant case.

Same; Same; Management Prerogatives; The only criterion to guide the exercise of its
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.—The employer’s right to conduct the affairs of its business, according to
its own discretion and judgment, is well-recognized. An employer has a free reign and
enjoys wide latitude of discretion to regulate all aspects of employment, including the
prerogative to instill discipline in its employees and to impose penalties, including
dismissal, upon erring employees. This is a management prerogative, where the free will
of management to conduct its own affairs to achieve its purpose takes form. The only
criterion to guide the exercise of its 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.

Same; Same; Same; The Court upholds the management’s 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 and
valid agreements.—As respondent’s employer, petitioner has the right to regulate,
according to its discretion and best judgment, work assignments, work methods, work
supervision, and work regulations, including the hiring, firing and discipline of its
employees. Indeed, petitioner has the management prerogative to discipline its
employees, like herein respondent, and to impose appropriate penalties on erring workers
pursuant to company rules and regulations. This Court upholds these 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 and valid agreements.
Same; Same; Reinstatement; Backwages; 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.
—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. After a finding of illegal dismissal herein, we
apply the foregoing provision entitling respondent Clarita P. Gacayan 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 her reinstatement. The Coca-Cola Export
Corporation vs. Gacayan, 638 SCRA 377, G.R. No. 149433 December 15, 2010
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION and PNCC TOLL OPERATIONS
EMPLOYEES AND WORKERS UNION (PNCC-TOEWU), respondents.
Labor Law; Resignation; Words and Phrases; “Resignation,” Explained.—Resignation is
defined in Section II, Rule XIV, Book V of the Revised Rules Implementing the Labor
Code, as a formal pronouncement or relinquishment of an office, and once accepted the
employee no longer has any right to the job. It therefore goes without saying that
resignation terminates the employer-employee relationship. From the foregoing
discussion, it is clear that the employer-employee relationship between the complainants
and PNCC ceased as of May 1991, a fact which was admitted by the complainants in
their comment. As such they were no longer employees of the PNCC as of June 1, 1991,
the cut-off period necessary for entitlement to the mid-year bonus.

Same; Same; Quitclaims; Once an employee resigns and executes a quitclaim in favor of
the employer, he is thereby estopped from filing any further money claims against the
employer arising from his employment.—We have held that once an employee resigns
and executes a quitclaim in favor of the employer, he is thereby estopped from filing any
further money claims against the employer arising from his employment. Such money
claims may be given due course only when the voluntariness of the execution of the
quitclaim or release is put in issue, or when it is established that there is an unwritten
agreement between the employer and employee which would entitle the employee to
other renumeration or benefits upon his or her resignation. In this case, the voluntariness
of the execution of the quitclaim was never put in issue and, as such, must be treated as a
valid and binding agreement between the complainants and PNCC.

Same; Same; Same; In signing the quitclaim, the necessary implication is that the release
would cover any and all claims arising out of the employment relationship.—
Complainants further argue that when they executed the quitclaim they had no intention
of waiving their mid-year bonus. In signing the quitclaim, however, the necessary
implication is that the release would cover any and all claims arising out of the
employment relationship.

Same; Same; Management Prerogatives; Bonuses; The granting of a bonus is basically a

management prerogative which cannot be forced upon the employer who may not be
obliged to assume the onerous burden of granting bonuses or other benefits aside from
the employees’ basic salaries or wages.—Moreover, a bonus is “a gratuity or act of
liberality of the giver which the recipient has no right to demand as a matter of right. It is
something given in addition to what is ordinarily received by or strictly due the recipient.
The granting of a bonus is basically a management prerogative which cannot be forced
upon the employer who may not be obliged to assume the onerous burden of granting
bonuses or other benefits aside from the employees’ basic salaries or wages. After all, the
term “bonus,” as used in employment contracts, conveys an idea of something which is
gratuitous, or which may be claimed to be gratuitous, over and above the prescribed
usage which the employer agrees to pay. It cannot be argued that the grant of the mid-
year bonus has become an established business practice of the PNCC, such that it has
virtually become a part of the employees’ salary for the same was given but once, that is,
on June 1, 1990. Philippine National Construction Corporation vs. National Labor
Relations Commission, 280 SCRA 109, G.R. No. 117240 October 2, 1997
PRODUCERS BANK OF THE PHILIPPINES, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and PRODUCERS BANK EMPLOYEES
ASSOCIATION,1 respondents.
Labor Law; Bonuses; Words and Phrases; A bonus is an amount granted and paid to an
employee for his industry and loyalty which contributed to the success of the employer’s
business and made possible the realization of profits; A bonus is not a demandable and
enforceable obligation, except when it is made part of the wage, salary or compensation
of the employee; An employer cannot be forced to distribute bonuses which it can no
longer afford to pay, for to hold otherwise would be to penalize the employer for his past
generosity.—A bonus is an amount granted and paid to an employee for his industry and
loyalty which contributed to the success of the employer’s business and made possible
the realization of profits. It is an act of generosity granted by an enlightened employer to
spur the employee to greater efforts for the success of the business and realization of
bigger profits. The granting of a bonus is a management prerogative, something given in
addition to what is ordinarily received by or strictly due the recipient. Thus, a bonus is
not a demandable and enforceable obligation, except when it is made part of the wage,
salary or compensation of the employee. However, an employer cannot be forced to
distribute bonuses which it can no longer afford to pay. To hold otherwise would be to
penalize the employer for his past generosity.

Same; Same; Banks and Banking; Conservators; Under Section 28-A of the Central Bank
Act, the Monetary Board may place a bank under the control of a conservator when it
finds that the bank is continuously unable or unwilling to maintain a condition of
solvency or liquidity; A bank in a depressed financial condition, reeling from tremendous
losses, cannot be legally compelled to continue paying the same amount of bonuses to its
employees.—Under Section 28-A, the Monetary Board may place a bank under the
control of a conservator when it finds that the bank is continuously unable or unwilling to
maintain a condition of solvency or liquidity. In Central Bank of the Philippines v. Court
of Appeals, the Court declared that the order placing petitioner herein under
conservatorship had long become final and its validity could no longer be litigated upon.
x x x Petitioner was not only experiencing a decline in its profits, but was reeling from
tremendous losses triggered by a bank-run which began in 1983. In such a depressed
financial condition, petitioner cannot be legally compelled to continue paying the same
amount of bonuses to its employees. Thus, the conservator was justified in reducing the
mid-year and Christmas bonuses of petitioner’s employees. To hold otherwise would be
to defeat the reason for the conservatorship which is to preserve the assets and restore the
viability of the financially precarious bank. Ultimately, it is to the employees’ advantage
that the conservatorship achieve its purposes for the alternative would be petitioner’s
closure whereby employees would lose not only their benefits, but their jobs as well.

Same; Same; 13th Month Pay; The intention of Presidential Decree (P.D.) 851 was to
grant some relief—not to all workers—but only to those not actually paid a 13th month
salary or what amounts to it, by whatever name called.—PD 851, which was issued by
President Marcos on 16 December 1975, requires all employers to pay their employees
receiving a basic salary of not more than P1,000 a month, regardless of the nature of the
employment, a 13th month pay, not later than December 24 of every year. However,
employers already paying their employees a 13th month pay or its equivalent are not
covered by the law. Under the Revised Guidelines on the Implementation of the 13th
Month Pay Law, the term “equivalent” shall be construed to include Christmas bonus,
mid-year bonus, cash bonuses and other payments amounting to not less than 1/12 of the
basic salary. The intention of the law was to grant some relief—not to all workers—but
only to those not actually paid a 13th month salary or what amounts to it, by whatever
name called. It was not envisioned that a double burden would be imposed on the
employer already paying his employees a 13th month pay or its equivalent—whether out
of pure generosity or on the basis of a binding agreement. To impose upon an employer
already giving his employees the equivalent of a 13th month pay would be to penalize
him for his liberality and in all probability, the employer would react by withdrawing the
bonuses or resist further voluntary grants for fear that if and when a law is passed giving
the same benefits, his prior concessions might not be given due credit.

Same; Wages and COLA (Cost of Living Allowance); Wage Order No. 6; The
creditability provision in Wage Order No. 6 is based on important public policy, that is,
the encouragement of employers to grant wage and allowance increases to their
employees higher than the minimum rates of increases prescribed by statute or
administrative regulation.—The creditability provision in Wage Order No. 6 is based on
important public policy, that is, the encouragement of employers to grant wage and
allowance increases to their employees higher than the minimum rates of increases
prescribed by statute or administrative regulation. Thus, we held in Apex Mining
Company, Inc. v. NLRC that—[t]o obliterate the creditability provisions in the Wage
Orders through interpretation or otherwise, and to compel employers simply to add on
legislated increases in salaries or allowances without regard to what is already being paid,
would be to penalize employers who grant their workers more than the statutorily
prescribed minimum rates of increases. Clearly, this would be counterproductive so far as
securing the interest of labor is concerned. The creditability provisions in the Wage
Orders prevent the penalizing of employers who are industry leaders and who do not wait
for statutorily prescribed increases in salary or allowances and pay their workers more
than what the law or regulations require.

Same; Same; The use of 314 as a divisor leads to the inevitable conclusion that the ten
legal holidays are already included therein.—Apparently, the divisor of 314 is arrived at
by subtracting all Sundays from the total number of calendar days in a year, since
Saturdays are considered paid rest days, as stated in the inter-office memorandum. Thus,
the use of 314 as a divisor leads to the inevitable conclusion that the ten legal holidays
are already included therein. Producers Bank of the Philippines vs. NLRC, 355 SCRA
489, G.R. No. 100701 March 28, 2001
PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY, petitioner, vs. NATIONAL
LABOR RELATIONS COMMISSION, and ODIN SECURITY AGENCY, as
representative of its Security Guards, respondents.
Civil Service; Jurisdiction; Government owned or controlled corporations with special
charters; Security guards not employees of petitioner.—The petitioner is a government-
owned or controlled corporation with a special charter. This places it under the scope of
the civil service (Art. XI [B] [1] and [2], 1987 Constitution); Boy Scouts of the
Philippines v. NLRC, 196 SCRA 176 [1991]; PNOC-Energy Development Corp. v.
NLRC, 201 SCRA 487 [1991]). However, the guards are not employees of the petitioner.
The contract of services explicitly states that the security guards are not considered
employees of the petitioner (Rollo, p. 45). There being no employer-employee
relationship between the petitioner and the security guards, the jurisdiction of the Civil
Service Commission may not be invoked in this case.

Labor Laws; Job contracting; National Labor Relations Commission; Jurisdiction;

“Employer” includes government-owned or controlled corporations.—Notwithstanding
that the petitioner is a government agency, its liabilities, which are joint and solidary with
that of the contractor, are provided in Articles 106, 107 and 109 of the Labor Code. This
places the petitioner’s liabilities under the scope of the NLRC. Moreover, Book Three,
Title II on Wages specifically provides that the term “employer” includes any person
acting directly or indirectly in the interest of an employer in relation to an employee and
shall include the Government and all its branches, subdivisions and instrumentalities, all
government-owned or controlled corporations and institutions as well as non-profit
private institutions, or organizations (Art. 97 [b], Labor Code; Eagle Security Agency,
Inc. v. NLRC, 173 SCRA 479 [1989]; Rabago v. NLRC, 200 SCRA 158 [1991]). The
NLRC, therefore, did not commit grave abuse of discretion in assuming jurisdiction to set
aside the Order of dismissal by the Labor Arbiter.
Same; Same; Solidary liability of contractor and “indirect employer” for unpaid wages.—
Settled is the rule that in job contracting, the petitioner as principal is jointly and
severally liable with the contractor for the payment of unpaid wages. The statutory basis
for the joint and several liability is set forth in Articles 107, and 109 in relation to Article
106 of the Labor Code. (Del Rosario and Sons Logging Enterprises, Inc. v. NLRC, 136
SCRA 669 [1985]; Baguio v. NLRC, 202 SCRA 465 [1991]; Ecal v. NLRC, 195 SCRA
224 [1991]). In the case at bar, the action instituted by the private respondent was for the
payment of unpaid wage differentials under Wage Order No. 6. xxx. The Wage Orders
are statutory and mandatory and can not be waived. The petitioner can not escape liability
since the law provides the joint and solidary liability of the principal and the contractor
for the protection of the laborers.

Same; Same; Same.—Given this peculiar circumstance, the private respondent should
also be faulted for the unpaid wage differentials of the security guards. By filing the
complaint in its own behalf and in behalf of the security guards, the private respondent
wishes to exculpate itself from liability on the strength of the ruling in the Eagle case that
the ultimate liability rests with the principal. Nonetheless, the inescapable fact is that the
employees must be guaranteed payment of the wages due them for the performance of
any work, task, job or project. They must be given ample protection as mandated by the
Constitution (See Article II, Section 18 and Article XIII, Section 3). Thus, to assure
compliance with the provisions of the Labor Code including the statutory minimum
wage, the joint and several liability of the contractor and the principal is mandated.
Philippine Fisheries Development Authority vs. National Labor Relations Commission,
213 SCRA 621, G.R. No. 94825 September 4, 1992
THE HOLY SEE, petitioner, vs. THE HON. ERIBERTO U. ROSARIO, JR., as Presiding
Judge of the Regional Trial Court of Makati, Branch 61 and STARBRIGHT SALES
ENTERPRISES, INC., respondents.
Remedial Law; Motion to Dismiss; Appeal; An order denying a motion to dismiss is not
reviewable by the appellate courts except when it is clear in the records that the trial court
has no alternative but to dismiss the complaint.—A preliminary matter to be threshed out
is the procedural issue of whether the petition for certiorari under Rule 65 of the Revised
Rules of Court can be availed of to question the order denying petitioner’s motion to
dismiss. The general rule is that an order denying a motion to dismiss is not reviewable
by the appellate courts, the remedy of the movant being to file his answer and to proceed
with the hearing before the trial court. But the general rule admits of exceptions, and one
of these is when it is very clear in the records that the trial court has no alternative but to
dismiss the complaint (Philippine National Bank v. Florendo, 206 SCRA 582 [1992];
Zagada v. Civil Service Commission, 216 SCRA 114 [1992]). In such a case, it would be
a sheer waste of time and energy to require the parties to undergo the rigors of a trial.

Public International Law; Diplomatic Immunity; Non-suability; Courts and Practices; A

state or international agency requests the Foreign Office of the state where it is sued to
convey to the court that it is entitled to immunity.—In Public International Law, when a
state or international agency wishes to plead sovereign or diplomatic immunity in a
foreign court, it requests the Foreign Office of the state where it is sued to convey to the
court that said defendant is entitled to immunity.

Same; Same; Same; In the Philippines, the practice is for the government sovereign or the
international organization to first secure an executive endorsement of its claim of
sovereign or diplomatic immunity.—In the Philippines, the practice is for the foreign
government or the international organization to first secure an executive endorsement of
its claim of sovereign or diplomatic immunity. But how the Philippine Foreign Office
conveys its endorsement to the courts varies. In International Catholic Migration
Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent
a letter directly to the Secretary of Labor and Employment, informing the latter that the
respondent-employer could not be sued because it enjoyed diplomatic immunity. In
World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign
Affairs sent the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974),
the U.S. Embassy asked the Secretary of Foreign Affairs to request the Solicitor General
to make, in behalf of the Commander of the United States Naval Base at Olongapo City,
Zambales, a “suggestion” to respondent Judge. The Solicitor General embodied the
“suggestion” in a Manifestation and Memorandum as amicus curiae.

Same; Same; Same.—In the case at bench, the Department of Foreign Affairs, through
the Office of Legal Affairs moved with this Court to be allowed to intervene on the side
of petitioner. The Court allowed the said Department to file its memorandum in support
of petitioner’s claim of sovereign immunity.

Same; Same; Same; Statehood; In 1929, through the Lateran Treaty, Italy recognized the
exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City.—In
1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the
exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City. It
also recognized the right of the Holy See to receive foreign diplomats, to send its own
diplomats to foreign countries, and to enter into treaties according to International Law
(Garcia, Questions and Problems In International Law, Public and Private 81 [1948]).

Same; Same; Same; Same; The Lateran Treaty established the statehood of the Vatican
City.—The Lateran Treaty established the statehood of the Vatican City “for the purpose
of assuring to the Holy See absolute and visible independence and of guaranteeing to it
indisputable sovereignty also in the field of international relations” (O’Connell, I
International Law 311 [1965]).

Same; Same; Same; Same; Despite its size and object, the Vatican City has an
independent government of its own, with the Pope, who is also head of the Roman
Catholic Church, as the Holy See or Head of State, in conformity with its traditions, and
the demands of its mission in the world.—The Vatican City fits into none of the
established categories of states, and the attribution to it of “sovereignty” must be made in
a sense different from that in which it is applied to other states (Fenwick, International
Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a community of national
states, the Vatican City represents an entity organized not for political but for
ecclesiastical purposes and international objects. Despite its size and object, the Vatican
City has an independent government of its own, with the Pope, who is also head of the
Roman Catholic Church, as the Holy See or Head of State, in conformity with its
traditions, and the demands of its mission in the world. Indeed, the world-wide interests
and activities of the Vatican City are such as to make it in a sense an “international state”
(Fenwick, supra. 125; Kelsen, Principles of International Law 160 [1956]).

Same; Same; Same; Same; Same; It is the Holy See that is the international person.—
Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as
the Holy See and not in the name of the Vatican City, one can conclude that in the Pope’s
own view, it is the Holy See that is the international person.

Same; Same; Same; The Holy See, through its Ambassador, the Papal Nuncio, has had
diplomatic representations with the Philippine government since 1957.—The Republic of
the Philippines has accorded the Holy See the status of a foreign sovereign. The Holy
See, through its Ambassador, the Papal Nuncio, has had diplomatic representations with
the Philippine government since 1957 (Rollo, p. 87). This appears to be the universal
practice in international relations.

Same; Same; Same; The right of a foreign sovereign to acquire property, real or personal,
in a receiving state, necessary for the creation and maintenance of its diplomatic mission,
is recognized in the 1961 Vienna Convention on Diplomatic Relations.—Lot 5-A was
acquired by petitioner as a donation from the Archdiocese of Manila. The donation was
made not for commercial purpose, but for the use of petitioner to construct thereon the
official place of residence of the Papal Nuncio. The right of a foreign sovereign to
acquire property, real or personal, in a receiving state, necessary for the creation and
maintenance of its diplomatic mission, is recognized in the 1961 Vienna Convention on
Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate
and entered into force in the Philippines on November 15, 1965.

Same; Same; Same; Petitioner did not sell Lot 5-A for profit or gain. It merely wanted to
dispose off the same because the squatters living thereon made it almost impossible for
petitioner to use it for the purpose of the donation.—The decision to transfer the property
and the subsequent disposal thereof are likewise clothed with a governmental character.
Petitioner did not sell Lot 5-A for profit or gain. It merely wanted to dispose off the same
because the squatters living thereon made it almost impossible for petitioner to use it for
the purpose of the donation. The fact that squatters have occupied and are still occupying
the lot, and that they stubbornly refuse to leave the premises, has been admitted by
private respondent in its complaint (Rollo, pp. 26, 27).

Same; Same; Same; The issue of Petitioner’s non-suability can be determined by the trial
court without going to trial in the light of the pleadings, particularly the admission of the
private respondent.—The issue of petitioner’s non-suability can be determined by the
trial court without going to trial in the light of the pleadings, particularly the admission of
private respondent. Besides, the privilege of sovereign immunity in this case was
sufficiently established by the Memorandum and Certification of the Department of
Foreign Affairs. As the department tasked with the conduct of the Philippines’ foreign
relations (Administrative Code of 1987, Book IV, Title I, Sec. 3), the Department of
Foreign Affairs has formally intervened in this case and officially certified that the
Embassy of the Holy See is a duly accredited diplomatic mission to the Republic of the
Philippines exempt from local jurisdiction and entitled to all the rights, privileges and
immunities of a diplomatic mission or embassy in this country (Rollo, pp. 156-157). The
determination of the executive arm of government that a state or instrumentality is
entitled to sovereign or diplomatic immunity is a political question that is conclusive
upon the courts (International Catholic Migration Commission v. Calleja, 190 SCRA 130
[1990]). Where the plea of immunity is recognized and affirmed by the executive branch,
it is the duty of the courts to accept this claim so as not to embarrass the executive arm of
the government in conducting the country’s foreign relations (World Health Organization
v. Aquino, 48 SCRA 242 [1972]). As in International Catholic Migration Commission
and in World Health Organization, we abide by the certification of the Department of
Foreign Affairs.

Same; Same; Same; Under both Public International Law and Transnational Law, a
person who feels aggrieved by the acts of a foreign sovereign can ask his own
government to espouse his cause through diplomatic channels.—Private respondent is not
left without any legal remedy for the redress of its grievances. Under both Public
International Law and Transnational Law, a person who feels aggrieved by the acts of a
foreign sovereign can ask his own government to espouse his cause through diplomatic
channels.

Same; Same; Same; Private respondent can ask the Philippine government, through the
Foreign Office, to espouse its claims against the Holy See.—Private respondent can ask
the Philippine government, through the Foreign Office, to espouse its claims against the
Holy See. Its first task is to persuade the Philippine government to take up with the Holy
See the validity of its claims. Of course, the Foreign Office shall first make a
determination of the impact of its espousal on the relations between the Philippine
government and the Holy See (Young, Remedies of Private Claimants Against Foreign
States, Selected Readings on Protection by Law of Private Foreign Investments 905, 919
[1964]). Once the Philippine government decides to espouse the claim, the latter ceases to
be a private cause. Holy See, The vs. Rosario, Jr., 238 SCRA 524, G.R. No. 101949
December 1, 1994
SOUTHEAST ASIAN FISHERIES DEVELOPMENT CENTER, represented by its
Chief, DR. FLOR J. LACANILAO, petitioner, vs. DANILO ACOSTA in his capacity as
Labor Arbiter of the National Labor Relations Commission, Regional Arbitration, Branch
VI, CORAZON CANTO, DAN BALIAO, ELIZABETH SUPETRAN, CARMELITA
FERRER, CATHRYN CONTRADOR, and DORIC VELOSO, respondents.
International Law; Jurisdiction; It is beyond question that petitioner SEAFDEC is an
international agency enjoying diplomatic immunity.—It is beyond question that petitioner
SEAFDEC is an international agency enjoying diplomatic immunity. This, we have
already held in Southeast Asian Fisheries Development Center-Aquaculture Department
vs. National Labor Relations Commission, G.R. No. 86773, 206 SCRA 283/1992/; see
also Lacanilao v. de Leon, G.R. No. 76532, 147 SCRA 286/1987, where we said
—“Petitioner Southeast Asian Fisheries Development Center-Aquaculture Department
(SEAFDEC-AQD) is an international agency beyond the jurisdiction of public
respondent NLRC.

Same; Same; Same; Section 2 of PD No. 292 had provided for the autonomous character
of SEAFDEC.—Furthermore, Section 2 of thesame decree had provided for the
autonomous character of SEAFDEC, thus: “x x x All funds received by the Department
shall be receipted and disbursed in accordance with the Agreement establishing the
Southeast Asian Fisheries Development Center and pertinent resolutions duly approved
by the SEAFDEC Council.”

Same; Same; Same; Anent the issue of waiver of immunity, suffice it to say at the
moment that the petitioner has timely raised the issue of jurisdiction.—Anent the issue of
waiver of immunity, suffice it to say at the moment that the petitioner has timely raised
the issue of jurisdiction. While the petitioner did not question the public respondent’s
lack of jurisdiction at the early stages of the proceedings, it, nevertheless, did so before it
rested its case and certainly well before the proceedings thereat had terminated. Southeast
Asian Fisheries Development Center vs. Acosta, 226 SCRA 49, G.R. Nos. 97468-70
September 2, 1993
G.R. No. 76607. February 26, 1990.*

UNITED STATES OF AMERICA, FREDERICK M. SMOUSE AND YVONNE

REEVES, petitioners, vs. HON. ELIODORO B. GUINTO, Presiding Judge, Branch
LVII, Regional Trial Court, Angeles City, ROBERTO T. VALENCIA, EMERENCIANA
C. TANGLAO, AND PABLO C. DEL PILAR, respondents.
G.R. No. 79470. February 26, 1990.*

UNITED STATES OF AMERICA, ANTHONY LAMACHIA, T/ SGT. USAF,

WILFREDO BELSA, PETER ORASCION AND ROSE CARTALLA, petitioners, vs.
HON. RODOLFO D. RO-DRIGO, as Presiding Judge of Branch 7, Regional Trial Court
(BAGUIO CITY), La Trinidad, Benguet and FABIAN GENO-VE, respondents.
G.R. No. 80018. February 26, 1990.*

UNITED STATES OF AMERICA, TOMI J. KINGI, DARREL D. DYE and STEVEN F.

BOSTICK, petitioners, vs. HON. JOSEFINA D. CEBALLOS, As Presiding Judge,
Regional Trial Court, Branch 66, Capas, Tarlac, and LUIS BAUTISTA, respondents.
G.R. No. 80258. February 26, 1990.*

UNITED STATES OF AMERICA, MAJOR GENERAL MI-CHAEL P. C. CARNS,

AIC ERNEST E. RIVENBURGH, AIC ROBIN BLEVINS, SGT. NOEL A.
GONZALES, SGT. THO-MAS MITCHELL, SGT. WAYNE L. BENJAMIN, ET AL.,
petitioners, vs. HON. CONCEPCION S. ALARCON VERGARA, as Presiding Judge,
Branch 62 REGIONAL TRIAL COURT, Ange-les City, and RICKY SANCHEZ,
FREDDIE SANCHEZ AKA FREDDIE RIVERA, EDWIN MARIANO, AKA JESSIE
DOLORES SANGALANG, ET AL., respondents.
Political Law; State Immunity from Suit; When the government enters into a contract, it
is deemed to have descended to the level of the other contracting party, and divested of
its sovereign immunity from suit with its implied consent.—The general law waiving the
immunity of the state from suit is found in Act No. 3083, under which the Philippine
government “consents and submits to be sued upon any moneyed claim involving
liability arising from contract, express or implied, which could serve as a basis of civil
action between private parties.” In Merritt v. Government of the Philippine Islands, a
special law was passed to enable a person to sue the government for an alleged tort.
When the government enters into a contract, it is deemed to have descended to the level
of the other contracting party and divested of its sovereign immunity from suit with its
implied consent. Waiver is also implied when the government files a complaint, thus
opening itself to a counterclaim. The above rules are subject to qualification. Express
consent is effected only by the will of the legislature through the medium of a duly
enacted statute. We have held that not all contracts entered into by the government will
operate as a waiver of its non-suability; distinction must be made between its sovereign
and proprietary acts. As for the filing of a complaint by the government, suability will
result only where the government is claiming affirmative relief from the defendant.
Same; Same; Same; Rule on waiver, not applicable when the contract entered into
involves its sovereign or governmental capacity.— There is no question that the United
States of America, like any other state, will be deemed to have impliedly waived its non-
suability if it has entered into a contract in its proprietary or private capacity. It is only
when the contract involves its sovereign or governmental capacity that no such waiver
may be implied. This was our ruling in United States of America v. Ruiz, where the
transaction in question dealt with the improvement of the wharves in the naval
installation at Subic Bay. As this was a clearly governmental function, we held that the
contract did not operate to divest the United States of its sovereign immunity from suit.
Same; Same; Same; Officers acting in their official capacity cannot be directly impleaded
for acts imputable to their principal which has not given its consent to be sued.—It is
clear from a study of the records of G.R. No. 80018 that the individually-named
petitioners therein were acting in the exercise of their official functions when they
conducted the buy-bust operation against the complainant and thereafter testified against
him at his trial. The said petitioners were in fact connected with the Air Force Office of
Special Investigators and were charged precisely with the function of preventing the
distribution, possession and use of prohibited drugs and prosecuting those guilty of such
acts. It cannot for a moment be imagined that they were acting in their private or
unofficial capacity when they apprehended and later testified against the complainant. It
follows that for discharging their duties as agents of the United States, they cannot be
directly im-pleaded for acts imputable to their principal, which has not given its consent
to be sued. As we observed in Sanders v. Veridiano: Given the official character of the
above-described letters, we have to conclude that the petitioners were, legally speaking,
being sued as officers of the United States government. As they have acted on behalf of
that government, and within the scope of their authority, it is that government, and not the
petitioners personally, that is responsible for their acts.

Same; Same; Express waiver of immunity cannot be made by a mere counsel of the
government but must be effected through a duly enacted statute.—We reject the
conclusion of the trial court that the answer filed by the special counsel of the Office of
the Sheriff Judge Advocate of Clark Air Base was a submission by the United States
government to its jurisdiction. As we noted in Republic v. Purisima, express waiver of
immunity cannot be made by a mere counsel of the government but must be effected
through a duly-enacted statute. Neither does such answer come under the implied forms
of consent as earlier discussed.

Same; Same; By entering into an employment contract with Geno-ve in the discharge of
its proprietary functions, it impliedly divested itself of its sovereign immunity from suit.
—From these circumstances, the Court can assume that the restaurant services offered at
the John Hay Air Station partake of the nature of a business enterprise undertaken by the
United States government in its proprietary capacity. Such services are not extended to
the American servicemen for free as a perquisite of membership in the Armed Forces of
the United States. Neither does it appear that they are exclusively offered to these
servicemen; on the contrary, it is well known that they are available to the general public
as well, including the tourists in Baguio City, many of whom make it a point to visit John
Hay for this reason. All persons availing themselves of this facility pay for the privilege
like all other customers as in ordinary restaurants. Although the prices are conced-edly
reasonable and relatively low, such services are undoubtedly operated for profit, as a
commercial and not a governmental activity. The consequence of this finding is that the
petitioners cannot invoke the doctrine of state immunity to justify the dismissal of the
damage suit against them by Genove. Such defense will not prosper even if it be
established that they were acting as agents of the United States when they investigated
and later dismissed Genove. For that matter, not even the United States government itself
can claim such immunity. The reason is that by entering into the employment contract
with Genove in the discharge of its proprietary functions, it impliedly divested itself of its
sovereign immunity from suit. United States of America vs. Guinto, 182 SCRA 644, G.R.
No. 76607, G.R. No. 79470, G.R. No. 80018, G.R. No. 80258 February 26, 1990
PENTAGON INTERNATIONAL SHIPPING SERVICES, INC., petitioner, vs. THE
COURT OF APPEALS, FILOMENO V. MADRIO, LUISITO G. RUBIANO, JDA
INTER-PHIL. MARITIME SERVICES CORPORATION, respondents.

Labor Law; Seafarers; Manning Agencies; A local manning agency seeking accreditation
of its foreign principal is mandated to submit the requirements listed under Section 2,
Rules and Regulations Governing Overseas Employment.—A local manning agency
seeking accreditation of its foreign principal is mandated to submit the requirements
listed under Section 2, supra. The use of the imperative word shall in the provision has
the invariable significance to impose the enforcement of an obligation especially where
public interest is involved. While the list is not exhaustive, the POEA identified the
foremost requisite to be the authenticated special power of attorney and manning
agreement. This identification is primarily due to the onerous responsibility assumed by
the manning agency under Section 10 of the Migrant Workers’ Act of 1995.

Same; Same; Manning Agreements; Special Power of Attorney; The law clearly
mandates that the special power of attorney (SPA) and manning agreement should be
authenticated, save only when the authorized officials of both the principal or hiring
company and its local agent signed the document in the presence of any member of the
Philippine Overseas Employment Administration (POEA) Directorate or duly designated
officers of the POEA.—The law clearly mandates that the special power of attorney and
manning agreement should be authenticated, save only when the authorized officials of
both the principal or hiring company and its local agent signed the document in the
presence of any member of the POEA Directorate or duly designated officers of the
POEA.

Same; Same; Same; Before a transfer of accreditation can be effected, the transferee
agency should likewise have to comply with the requirements for accreditation contained
in Section 2, Rules and Regulations Governing Overseas Employment.—As regards the
transfer of accreditation, the following provisions apply, thus: Section 6. Transfer of
Accreditation.—The accreditation of a principal may be transferred to another agency
provided that transfer shall not involve any diminution of wages and benefits of workers.
The transferee agency in these instances shall comply with the requirements for
accreditation and shall assume full and complete responsibility to all contractual
obligations of the principals to its workers originally recruited and processed by the
former agency. Prior to the transfer of accreditation, the Administration shall notify the
previous agency and principal of such application. Section 7. Actions on Applications for
Accreditation of Projects Whose Contracting Partners or Principals Have Outstanding
Obligations.—Applications for the transfer of accreditation of principals or projects shall
be acted by the Administration upon submission of all requirements by the new transferee
agency. x x x x (Emphasis supplied) The foregoing rules are clear to the effect that before
a transfer of accreditation can be effected, the transferee agency should likewise have to
comply with the requirements for accreditation contained in Section 2, supra. The POEA
can act on the transfer of accreditation only after all the requirements shall have been
submitted.
Minutes of Meetings; The minutes of any meeting are simply the notes or written record
of the meeting, which usually describe what transpire during the meeting, identify the
attendees, and present the statements and related responses or resolutions of the issues
discussed.—Verily, the minutes of any meeting are simply the notes or written record of
the meeting, which usually describe what transpire during the meeting, identify the
attendees, and present the statements and related responses or resolutions of the issues
discussed. Often, the minutes are terse and meant to record only the basic information,
like the actions discussed and the decisions made. In contrast, the special power of
attorney is the grant of authority by the principal to the agent to act on a particular or
specific matter, while the manning agreement states, among others, the responsibilities of
both principal and manning agencies with respect to the employment of seafarers.

Labor Law; Seafarers; Manning Agencies; Manning Agreements; The provisions of the
Philippine Overseas Employment Administration (POEA) Rules and Regulations to the
effect that the manning agreement extends up to and until the expiration of the
employment contracts of the employees recruited and employed pursuant to the
recruitment agreement are also clear enough.—It is relevant to observe that Pentagon
cannot feign ignorance of Section 10, paragraph 2, of the Migrant Workers’ Act of 1995
to the effect that its liabilities would continue during the entire period or duration of the
employment contract, and would not be affected by any substitution, amendment or
modification of the contract made either locally or in a foreign country. The provisions of
the POEA Rules and Regulations to the effect that the manning agreement extends up to
and until the expiration of the employment contracts of the employees recruited and
employed pursuant to the recruitment agreement are also clear enough. As such,
Pentagon is not exempt from its liabilities and responsibilities towards Madrio and
Rubiano. Pentagon International Shipping Services, Inc. vs. Court of Appeals, 761 SCRA
142, G.R. No. 169158 July 1, 2015
SAMEER OVERSEAS PLACEMENT AGENCY, INC., petitioner, vs. JOY C.
CABILES, respondent.

Labor Law; Termination of Employment; Employers cannot be compelled to retain the

services of an employee who is guilty of acts that are inimical to the interest of the
employer.—Indeed, employers have the prerogative to impose productivity and quality
standards at work. They may also impose reasonable rules to ensure that the employees
comply with these standards. Failure to comply may be a just cause for their dismissal.
Certainly, employers cannot be compelled to retain the services of an employee who is
guilty of acts that are inimical to the interest of the employer. While the law
acknowledges the plight and vulnerability of workers, it does not “authorize the
oppression or self-destruction of the employer.” Management prerogative is recognized
in law and in our jurisprudence. This prerogative, however, should not be abused. It is
“tempered with the employee’s right to security of tenure.” Workers are entitled to
substantive and procedural due process before termination. They may not be removed
from employment without a valid or just cause as determined by law and without going
through the proper procedure.

Same; Same; Inefficiency; To show that dismissal resulting from inefficiency in work is
valid, it must be shown that: 1) the employer has set standards of conduct and
workmanship against which the employee will be judged; 2) the standards of conduct and
workmanship must have been communicated to the employee; and 3) the communication
was made at a reasonable time prior to the employee’s performance assessment.—The
burden of proving that there is just cause for termination is on the employer. “The
employer must affirmatively show rationally adequate evidence that the dismissal was for
a justifiable cause.” Failure to show that there was valid or just cause for termination
would necessarily mean that the dismissal was illegal. To show that dismissal resulting
from inefficiency in work is valid, it must be shown that: 1) the employer has set
standards of conduct and workmanship against which the employee will be judged; 2) the
standards of conduct and workmanship must have been communicated to the employee;
and 3) the communication was made at a reasonable time prior to the employee’s
performance assessment.

Same; Probationary Employees; Due Process; Due process requires that the probationary
employee be informed of such standards at the time of his or her engagement so he or she
can adjust his or her character or workmanship accordingly.—The predetermined
standards that the employer sets are the bases for determining the probationary
employee’s fitness, propriety, efficiency, and qualifications as a regular employee. Due
process requires that the probationary employee be informed of such standards at the time
of his or her engagement so he or she can adjust his or her character or workmanship
accordingly. Proper adjustment to fit the standards upon which the employee’s
qualifications will be evaluated will increase one’s chances of being positively assessed
for regularization by his or her employer.

Same; Termination of Employment; Two-Notice Rule; The employer is required to give

the charged employee at least two written notices before termination; Aside from the
notice requirement, the employee must also be given “an opportunity to be heard.”—A
valid dismissal requires both a valid cause and adherence to the valid procedure of
dismissal. The employer is required to give the charged employee at least two written
notices before termination. One of the written notices must inform the employee of the
particular acts that may cause his or her dismissal. The other notice must “[inform] the
employee of the employer’s decision.” Aside from the notice requirement, the employee
must also be given “an opportunity to be heard.” Petitioner failed to comply with the twin
notices and hearing requirements. Respondent started working on June 26, 1997. She was
told that she was terminated on July 14, 1997 effective on the same day and barely a
month from her first workday. She was also repatriated on the same day that she was
informed of her termination. The abruptness of the termination negated any finding that
she was properly notified and given the opportunity to be heard. Her constitutional right
to due process of law was violated.
24
     Same; Same; Migrant Workers and Overseas Filipinos Act of 1995 (R.A. No. 8042);
Section 10 of Republic Act (R.A.) No. 8042, otherwise known as the Migrant Workers
and Overseas Filipinos Act of 1995, states that overseas workers who were terminated
without just, valid, or authorized cause “shall be entitled to the full reimbursement of his
placement fee with interest of twelve (12%) per annum, plus his salaries for the
unexpired portion of his employment contract or for three (3) months for every year of
the unexpired term, whichever is less.”—Respondent Joy Cabiles, having been illegally
dismissed, is entitled to her salary for the unexpired portion of the employment contract
that was violated together with attorney’s fees and reimbursement of amounts withheld
from her salary. Section 10 of Republic Act No. 8042, otherwise known as the Migrant
Workers and Overseas Filipinos Act of 1995, states that overseas workers who were
terminated without just, valid, or authorized cause “shall be entitled to the full
reimbursement of his placement fee with interest of twelve (12%) per annum, plus his
salaries for the unexpired portion of his employment contract or for three (3) months for
every year of the unexpired term, whichever is less.”

Same; Same; Same; Repatriation; Section 15 of Republic Act (R.A.) No. 8042 states that
“repatriation of the worker and the transport of his [or her] personal belongings shall be
the primary responsibility of the agency which recruited or deployed the worker
overseas.”—Section 15 of Republic Act No. 8042 states that “repatriation of the worker
and the transport of his [or her] personal belongings shall be the primary responsibility of
the agency which recruited or deployed the worker overseas.” The exception is when
“termination of employment is due solely to the fault of the worker,” which as we have
established, is not the case. It reads: SEC. 15. REPATRIATION OF WORKERS;
EMERGENCY REPATRIATION FUND.—The repatriation of the worker and the
transport of his personal belongings shall be the primary responsibility of the agency
which recruited or deployed the worker overseas. All costs attendant to repatriation shall
be borne by or charged to the agency concerned and/or its principal. Likewise, the
repatriation of remains and transport of the personal belongings of a deceased worker and
all costs attendant thereto shall be borne by the principal and/or local agency. However,
in cases where the termination of employment is due solely to the fault of the worker, the
principal/employer or agency shall not in any manner be responsible for the repatriation
of the former and/or his belongings.

Same; Same; Attorneys Fees; The Labor Code also entitles the employee to 10% of the
amount of withheld wages as attorney’s fees when the withholding is unlawful.—The
Labor Code also entitles the employee to 10% of the amount of withheld wages as
attorney’s fees when the withholding is unlawful. The Court of Appeals affirmed the
National Labor Relations Commission’s decision to award respondent NT$46,080.00 or
the three-month equivalent of her salary, attorney’s fees of NT$300.00, and the
reimbursement of the withheld NT$3,000.00 salary, which answered for her repatriation.
We uphold the finding that respondent is entitled to all of these awards. The award of the
three-month equivalent of respondent’s salary should, however, be increased to the
amount equivalent to the unexpired term of the employment contract.

Same; Same; Constitutional Law; Equal Protection of the Laws; Due Process; In Serrano
v. Gallant Maritime Services, Inc. and Marlow Navigation Co., Inc., 582 SCRA 254
(2009), the Supreme Court (SC) ruled that the clause “or for three (3) months for every
year of the unexpired term, whichever is less” is unconstitutional for violating the equal
protection clause and substantive due process.—In Serrano v. Gallant Maritime Services,
Inc. and Marlow Navigation Co., Inc., 582 SCRA 254 (2009), this court ruled that the
clause “or for three (3) months for every year of the unexpired term, whichever is less” is
unconstitutional for violating the equal protection clause and substantive due process. A
statute or provision which was declared unconstitutional is not a law. It “confers no
rights; it imposes no duties; it affords no protection; it creates no office; it is inoperative
as if it has not been passed at all.” We are aware that the clause “or for three (3) months
for every year of the unexpired term, whichever is less” was reinstated in Republic Act
No. 8042 upon promulgation of Republic Act No. 10022 in 2010.

Statutory Construction; Statutes; When a law or a provision of law is null because it is

inconsistent with the Constitution, the nullity cannot be cured by reincorporation or
reenactment of the same or a similar law or provision.—In the hierarchy of laws, the
Constitution is supreme. No branch or office of the government may exercise its powers
in any manner inconsistent with the Constitution, regardless of the existence of any law
that supports such exercise. The Constitution cannot be trumped by any other law. All
laws must be read in light of the Constitution. Any law that is inconsistent with it is a
nullity. Thus, when a law or a provision of law is null because it is inconsistent with the
Constitution, the nullity cannot be cured by reincorporation or reenactment of the same or
a similar law or provision. A law or provision of law that was already declared
unconstitutional remains as such unless circumstances have so changed as to warrant a
reverse conclusion.

Constitutional Law; Equal Protection of the Laws; Due Process; Equal protection of the
law is a guarantee that persons under like circumstances and falling within the same class
are treated alike, in terms of “privileges conferred and liabilities enforced.”—We observe
that the reinstated clause, this time as provided in Republic Act. No. 10022, violates the
constitutional rights to equal protection and due process. Petitioner as well as the
Solicitor General have failed to show any compelling change in the circumstances that
would warrant us to revisit the precedent. We reiterate our finding in Serrano v. Gallant
Maritime that limiting wages that should be recovered by an illegally dismissed overseas
worker to three months is both a violation of due process and the equal protection clauses
of the Constitution. Equal protection of the law is a guarantee that persons under like
circumstances and falling within the same class are treated alike, in terms of “privileges
conferred and liabilities enforced.” It is a guarantee against “undue favor and individual
or class privilege, as well as hostile discrimination or the oppression of inequality.”
Same; Same; There is no violation of the equal protection clause if the law applies
equally to persons within the same class and if there are reasonable grounds for
distinguishing between those falling within the class and those who do not fall within the
class.—In creating laws, the legislature has the power “to make distinctions and
classifications.” In exercising such power, it has a wide discretion. The equal protection
clause does not infringe on this legislative power. A law is void on this basis, only if
classifications are made arbitrarily. There is no violation of the equal protection clause if
the law applies equally to persons within the same class and if there are reasonable
grounds for distinguishing between those falling within the class and those who do not
fall within the class. A law that does not violate the equal protection clause prescribes a
reasonable classification. A reasonable classification “(1) must rest on substantial
distinctions; (2) must be germane to the purposes of the law; (3) must not be limited to
existing conditions only; and (4) must apply equally to all members of the same class.”
The reinstated clause does not satisfy the requirement of reasonable classification.

Same; Same; There can never be a justification for any form of government action that
alleviates the burden of one sector, but imposes the same burden on another sector,
especially when the favored sector is composed of private businesses such as placement
agencies, while the disadvantaged sector is composed of Overseas Filipino Workers
(OFWs) whose protection no less than the Constitution commands.—[T]here can never
be a justification for any form of government action that alleviates the burden of one
sector, but imposes the same burden on another sector, especially when the favored sector
is composed of private businesses such as placement agencies, while the disadvantaged
sector is composed of OFWs whose protection no less than the Constitution commands.
The idea that private business interest can be elevated to the level of a compelling state
interest is odious.” Along the same line, we held that the reinstated clause violates due
process rights. It is arbitrary as it deprives overseas workers of their monetary claims
without any discernable valid purpose. Respondent Joy Cabiles is entitled to her salary
for the unexpired portion of her contract, in accordance with Section 10 of Republic Act
No. 8042. The award of the three-month equivalence of respondent’s salary must be
modified accordingly. Since she started working on June 26, 1997 and was terminated on
July 14, 1997, respondent is entitled to her salary from July 15, 1997 to June 25, 1998.
“To rule otherwise would be iniquitous to petitioner and other OFWs, and would, in
effect, send a wrong signal that principals/employers and recruitment/manning agencies
may violate an OFW’s security of tenure which an employment contract embodies and
actually profit from such violation based on an unconstitutional provision of law.”

Interest Rates; Bangko Sentral ng Pilipinas Circular No. 799; The Bangko Sentral ng
Pilipinas (BSP) Circular No. 799 of June 21, 2013, which revised the interest rate for loan
or forbearance from 12% to 6% in the absence of stipulation, applies in this case.—On
the interest rate, the Bangko Sentral ng Pilipinas Circular No. 799 of June 21, 2013,
which revised the interest rate for loan or forbearance from 12% to 6% in the absence of
stipulation, applies in this case. The pertinent portions of Circular No. 799, Series of
2013, read: The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved
the following revisions governing the rate of interest in the absence of stipulation in loan
contracts, thereby amending Section 2 of Circular No. 905, Series of 1982: Section 1. The
rate of interest for the loan or forbearance of any money, goods or credits and the rate
allowed in judgments, in the absence of an express contract as to such 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.

Same; Same; Loans; Circular No. 799 is applicable only in loans and forbearance of
money, goods, or credits, and in judgments when there is no stipulation on the applicable
interest rate; Circular No. 799 is not applicable when there is a law that states otherwise.
—Circular No. 799 is applicable only in loans and forbearance of money, goods, or
credits, and in judgments when there is no stipulation on the applicable interest rate.
Further, it is only applicable if the judgment did not become final and executory before
July 1, 2013. We add that Circular No. 799 is not applicable when there is a law that
states otherwise. While the Bangko Sentral ng Pilipinas has the power to set or limit
interest rates, these interest rates do not apply when the law provides that a different
interest rate shall be applied. “[A] Central Bank Circular cannot repeal a law. Only a law
can repeal another law.”

Same; Same; Labor Law; Placement Fees; There is an implied stipulation in contracts
between the placement agency and the overseas worker that in case the overseas worker
is adjudged as entitled to reimbursement of his or her placement fees, the amount shall be
subject to a 12% interest per annum. This implied stipulation has the effect of removing
awards for reimbursement of placement fees from Circular No. 799’s coverage.—Laws
are deemed incorporated in contracts. “The contracting parties need not repeat them.
They do not even have to be referred to. Every contract, thus, contains not only what has
been explicitly stipulated, but the statutory provisions that have any bearing on the
matter.” There is, therefore, an implied stipulation in contracts between the placement
agency and the overseas worker that in case the overseas worker is adjudged as entitled to
reimbursement of his or her placement fees, the amount shall be subject to a 12% interest
per annum. This implied stipulation has the effect of removing awards for reimbursement
of placement fees from Circular No. 799’s coverage.

Same; Same; Same; Awards of salary for the unexpired portion of the employment
contract under Republic Act (R.A.) No. 8042 are covered by Circular No. 799 because
the law does not provide for a specific interest rate that should apply.—The same cannot
be said for awards of salary for the unexpired portion of the employment contract under
Republic Act No. 8042. These awards are covered by Circular No. 799 because the law
does not provide for a specific interest rate that should apply. In sum, if judgment did not
become final and executory before July 1, 2013 and there was no stipulation in the
contract providing for a different interest rate, other money claims under Section 10 of
Republic Act No. 8042 shall be subject to the 6% interest per annum in accordance with
Circular No. 799. This means that respondent is also entitled to an interest of 6% per
annum on her money claims from the finality of this judgment.

Labor Law; Overseas Filipino Workers; Solidary Obligations; Migrant Workers and
Overseas Filipinos Act of 1995 (Republic Act [R.A.] No. 8042); Section 10 of the
Migrant Workers and Overseas Filipinos Act of 1995 provides that the foreign employer
and the local employment agency are jointly and severally liable for money claims
including claims arising out of an employer-employee relationship and/or damages.—
Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995 provides that the
foreign employer and the local employment agency are jointly and severally liable for
money claims including claims arising out of an employer-employee relationship and/or
damages. This section also provides that the performance bond filed by the local agency
shall be answerable for such money claims or damages if they were awarded to the
employee. This provision is in line with the state’s policy of affording protection to labor
and alleviating workers’ plight. In overseas employment, the filing of money claims
against the foreign employer is attended by practical and legal complications. The
distance of the foreign employer alone makes it difficult for an overseas worker to reach
it and make it liable for violations of the Labor Code. There are also possible conflict of
laws, jurisdictional issues, and procedural rules that may be raised to frustrate an overseas
worker’s attempt to advance his or her claims.

Same; Same; Same; In the case of overseas employment, either the local agency or the
foreign employer may be sued for all claims arising from the foreign employer’s labor
law violations.—The fundamental effect of joint and several liability is that “each of the
debtors is liable for the entire obligation.” A final determination may, therefore, be
achieved even if only one of the joint and several debtors are impleaded in an action.
Hence, in the case of overseas employment, either the local agency or the foreign
employer may be sued for all claims arising from the foreign employer’s labor law
violations. This way, the overseas workers are assured that someone — the foreign
employer’s local agent — may be made to answer for violations that the foreign
employer may have committed. The Migrant Workers and Overseas Filipinos Act of
1995 ensures that overseas workers have recourse in law despite the circumstances of
their employment. By providing that the liability of the foreign employer may be
“enforced to the full extent” against the local agent, the overseas worker is assured of
immediate and sufficient payment of what is due them.

Same; Same; Same; It must be emphasized that the local agency that is held to answer for
the overseas worker’s money claims is not left without remedy. The law does not
preclude it from going after the foreign employer for reimbursement of whatever
payment it has made to the employee to answer for the money claims against the foreign
employer.—Corollary to the assurance of immediate recourse in law, the provision on
joint and several liability in the Migrant Workers and Overseas Filipinos Act of 1995
shifts the burden of going after the foreign employer from the overseas worker to the
local employment agency. However, it must be emphasized that the local agency that is
held to answer for the overseas worker’s money claims is not left without remedy. The
law does not preclude it from going after the foreign employer for reimbursement of
whatever payment it has made to the employee to answer for the money claims against
the foreign employer. A further implication of making local agencies jointly and
severally liable with the foreign employer is that an additional layer of protection is
afforded to overseas workers. Local agencies, which are businesses by nature, are
inoculated with interest in being always on the lookout against foreign employersthat
tend to violate labor law. Lest they risk their reputation or finances, local agencies must
already have mechanisms for guarding against unscrupulous foreign employers even at
the level prior to overseas employment applications.

 Brion, J., Concurring and Dissenting Opinion:

Constitutional Law; Equal Protection of the Laws; View that take exception to the
ponencia’s full adoption of the ruling in Serrano v. Gallant Maritime Services, Inc., et al.,
582 SCRA 254 (2009), to the extent that it applies the strict scrutiny standard in invoking
the equal protection guarantee.—I take exception to the ponencia’s full adoption of the
ruling in Serrano v. Gallant Maritime Services, Inc., et al., 582 SCRA 254 (2009), to the
extent that it applies the strict scrutiny standard in invoking the equal protection
guarantee. To my mind, the circumstances of this case do not justify the ponencia’s
approach of extending and expanding the use of the strict scrutiny standard in
invalidating the subject clause (as reinstated in R.A. No. 8042 by R.A. No. 10022). The
conclusion that the subject clause created a “suspect” classification is simply misplaced.
The approach, sadly, only unnecessarily shifted the burden to the government, to prove:
(1) a compelling state interest; and (2) that the legislation is narrowly tailored to achieve
the intended result. It also unnecessarily undermines the presumed constitutionality of
statutes and of the respect that the Court accords to the acts of a co-equal branch. The
differential or rational basis scrutiny, i.e., where the challenged classification needs only
be shown to be rationally related to serving a legitimate state interest, would have
undoubtedly served the purpose without bringing these unnecessary implications.

Labor Law; Overseas Filipino Workers; Migrant Workers and Overseas Filipinos Act of
1995 (R.A. No. 8042); View that Republic Act (R.A.) No. 8042 is discernibly a piece of
social legislation that the State enacted in the exercise of its police power, precisely to
give teeth and arms to the constitutional provisions on labor under its aim to “establish a
higher standard of protection and promotion of the welfare of migrant worker, their
families and of overseas Filipinos in distress.”—R.A. No. 8042 is discernibly a piece of
social legislation that the State enacted in the exercise of its police power, precisely to
give teeth and arms to the constitutional provisions on labor under

32
its aim to “establish a higher standard of protection and promotion of the welfare of
migrant worker, their families and of overseas Filipinos in distress.” Otherwise stated, it
draws power and life from the constitutional provisions that it seeks to concretize and
implement. As I pointed out in my Serrano Opinion, “the express policy declarations of
R.A. No. 8042 show that its purposes are reiterations of the very same policies enshrined
in the Constitution x x x [They] patently characterize R.A. No. 8042 as a direct
implementation of the constitutional objectives on Filipino overseas work so that it must
be read and understood in terms of these policy objectives. Under this interpretative
guide, any provision in R.A. No. 8042 inimical to the interest of an overseas Filipino
worker (OFW) cannot have any place in the law.” [Underscoring supplied] Note also
(again, as I reflected in my Serrano Opinion) that while R.A. No. 8042 acknowledges that
the State shall “promote full employment,” it likewise provides that “the State does not
promote overseas employment as a means to sustain economic growth and national
development. The existence of overseas employment program rests solely on the
assurance that the dignity and fundamental human rights and freedom of Filipino citizens
shall not, at any time, be compromised and violated.” The Act, however, concludes its
Declaration of Policies by stating that “[n]onetheless, the deployment of Filipino overseas
workers, whether land-based or sea-based, by local service contractors and manning
agencies employing them shall be encouraged. Appropriate incentives may be extended
to them.”
Same; Same; Same; View that Section 10 of Republic Act (R.A.) No. 8042 obviously
protects the Overseas Filipino Workers (OFWs) as against the employer and the
recruitment agency in cases of unlawful termination of service. Unfortunately, it limits
the liability to the “reimbursement of the placement fee and interest, and the payment of
his salaries for the unexpired portion of his employment contract or for three (3) months
for every year of the unexpired term, whichever is less.”—Of particular importance to the
present case is Section 10 of R.A. No. 8042 which governs the OFWs’ money claims.
Pursuant to its terms, the Act obviously protects the OFW as against the employer and the
recruitment agency in cases of unlawful termination of service.  Unfortunately, it limits
the liability to the “reimbursement of the placement fee and interest, and the payment of
his salaries for the unexpired portion of his employment contract or for three (3) months
for every year of the unexpired term, whichever is less.”
This limitation is a step backward as it imposes a cap on the liability of the foreign
principal/employer and the contractor/recruitment agency even as it earlier declared their
liability joint and solidary. To be an “appropriate incentive,” this limitation of liability
can only be justified under the terms of the law, i.e., “the incentive must necessarily
relate to the law’s purpose with reasonable expectation that it would serve this purpose; it
must also accrue to its intended beneficiaries (the recruitment/placement agencies), and
not to parties to whom the reason for the grant does not apply.”

Same; Same; Same; View that Section 10 of Republic Act (R.A.) No. 8042 actually
limits what is otherwise the foreign principal/employer’s full liability under the Act and
exceeds what the Act intended — to grant incentives to recruitment/manning agencies.—
As I pointed out in my Serrano Opinion, Section 10 of R.A. No. 8042 provides measures
that collectively protect OFWs, i.e., by ensuring the integrity of their contracts; by
establishing the responsible parties; and by providing the mechanisms for their
enforcement that imposes direct and primary liability to the foreign principal employer.
Yet, Section 10 presents a hidden twist affecting the principal/employer’s liability. As
worded, the Act “simply limits the OFWs’ recovery in wrongful dismissal situations.
Thus, it redounds to the benefit of whoever may be liable, including the
principal/employer — the direct employer primarily liable for the wrongful dismissal.”
From this perspective, Section 10 actually limits what is otherwise the foreign
principal/employer’s full liability under the Act and exceeds what the Act intended — to
grant incentives to recruitment/manning agencies. “Section 10, in short, really operates to
benefit the wrong party and allows that party, without justifiable reason, to mitigate its
liability for wrongful dismissals.” [Emphasis supplied] “Because of this hidden twist, the
limitation of liability under Section 10 cannot be an “appropriate” incentive.”

Same; Same; Same; View that the liability limitation for wrongful dismissals of already
deployed Overseas Filipino Workers (OFWs) is really part of a scheme to sell Filipino
overseas labor at a bargain for purposes solely of attracting the market, a scheme that
sadly reduces our OFWs to mere cash cows.—The chosen mode of granting the
incentive, i.e., the liability limitation for wrongful dismissals of already deployed OFWs,
effectively imposed with legal sanction, a partial condonation of the foreign
principal/employer’s liability to OFWs. The incentive, therefore, “from a more practical
and realistic view, is really part of a scheme to sell Filipino overseas labor at a bargain for
purposes solely of attracting the market,” a scheme that sadly reduces our OFWs to mere
cash cows.
Same; Same; Same; View that the “incentive scheme” effectively benefits the
recruitment/manning agencies and foreign principal/employer at the expense of the
Overseas Filipino Workers (OFWs) from whom the salaries for the unexpired portion of
the contract are taken and to whom these salaries rightfully belong.—The “incentive
scheme” effectively benefits the recruitment/manning agencies and foreign
principal/employer at the expense of the OFWs from whom the salaries for the unexpired
portion of the contract are taken and to whom these salaries rightfully belong. In effect,
“the principals/employers and the recruitment/manning agencies profit from their
violation of the security of tenure that an employment contract embodies.” The OFWs, on
the other hand, are afforded lesser protection because: (1) they are afforded reduced
recovery by operation of law; (2) the reduced recovery renders wrongful dismissal
situations more alluring, easier to facilitate and less onerous to undertake which foreign
employers will most certainly consider in termination of employment decisions. These
inimical effects obviously will remain as long as the subject clause remains in Section 10
of R.A. No. 8042, this time as reinstated by R.A. No. 10022. The “inherently oppressive,
arbitrary, confiscatory and inimical provision [under Section 10 of R.A. No. 8042 should,
therefore,] be struck down for its conflict with the substantive aspect of the constitutional
due process guarantee. Thus, I vote to declare as unconstitutional the phrase “for three (3)
months for every year of the unexpired terms, whichever is less” in the fifth and final
paragraph of Section 10 of R.A. 8042.” Sameer Overseas Placement Agency, Inc. vs.
Cabiles, 732 SCRA 22, G.R. No. 170139 August 5, 2014
APQ SHIPMANAGEMENT CO., LTD. and APQ CREW MANAGEMENT USA, INC.,
petitioners, vs. ANGELITO L. CASEÑAS, respondent.

Remedial Law; Civil Procedure; Appeals; Supreme Court; The Supreme Court (SC) is
not a trier of facts and, thus, its jurisdiction is limited only to reviewing errors of law.—
At the outset, it is to be emphasized that the Court is not a trier of facts and, thus, its
jurisdiction is limited only to reviewing errors of law. The rule, however, admits of
certain exceptions, one of which is where the findings of fact of the lower tribunals and
the appellate court are contradictory. Such is the case here. Thus, the Court is constrained
to review and resolve the factual issue in order to settle the controversy.

Labor Law; Seafarers; Philippine Overseas Employment Administration-Standard

Employment Contract; While the seafarer and his employer are governed by their mutual
agreement, the Philippine Overseas Employment Administration (POEA) Rules and
Regulations require that the Philippine Overseas Employment Administration-Standard
Employment Contract (POEA-SEC) be integrated in every seafarer’s contract.—
Employment contracts of seafarers on board foreign ocean-going vessels are not ordinary
contracts. They are regulated and an imprimatur by the State is necessary. While the
seafarer and his employer are governed by their mutual agreement, the POEA Rules and
Regulations require that the POEA-SEC be integrated in every seafarer’s contract. In this
case, there is no dispute that Caseñas’ employment contract was duly approved by the
POEA and that it incorporated the provisions of the POEA-SEC.

Remedial Law; Evidence; Theory of Imputed Knowledge; Agency; The theory of

imputed knowledge ascribed the knowledge of the agent to the principal, not the other
way around.—In Sunace International Management Services, Inc. v. NLRC, 480 SCRA
146 (2006), the Court ruled that the theory of imputed knowledge ascribed the knowledge
of the agent to the principal, not the other way around. The knowledge of the principal-
foreign employer could not, therefore, be imputed to its agent. As there was no
substantial proof that Sunace knew of, and consented to be bound under, the 2-year
employment contract extension, it could not be said to be privy thereto. As such, it and its
owner were not held solidarily liable for any of the complainant’s claims arising from the
2-year employment extension.

Labor Law; Seafarers; Termination of Employment; In a nutshell, there are three (3)
requirements necessary for the complete termination of the employment contract: 1]
termination due to expiration or other reasons/causes; 2] signing off from the vessel; and
3] arrival at the point of hire.—It is to be observed that both provisions require the
seafarer to arrive at the point of hire as it signifies the completion of the employment
contract, and not merely its expiration. Similarly, a seafarer’s employment contract is
terminated even before the contract expires as soon as he arrives at the point of hire and
signs off for medical reasons, due to shipwreck, voluntary resignation or for other just
causes. In a nutshell, there are three (3) requirements necessary for the complete
termination of the employment contract: 1] termination due to expiration or other
reasons/causes; 2] signing off from the vessel; and 3] arrival at the point of hire. In this
case, there was no clear showing that Caseñas signed off from the vessel upon the
expiration of his employment contract, which was in February or April 2005. He did not
arrive either in Manila, his point of hire, because he was still on board the vessel MV
Haitien Pride on the supposed date of expiration of his contract. It was only on August
14, 2006 that he signed off from MV Haitien Pride and arrived in Manila on August 30,
2006. In Interorient Maritime Enterprises, Inc. v. NLRC, 261 SCRA 757 (1996), the
Court held that the obligations and liabilities of the local agency and its foreign principal
do not end upon the expiration of the contracted period as they were duty bound to
repatriate the seaman to the point of hire to effectively terminate the contract of
employment.

Maritime Law; Seaworthiness; While seaworthiness is commonly equated with the

physical aspect and condition of the vessel for voyage as its ability to withstand the rigors
of the sea, it must not be forgotten that a vessel should be armed with the necessary
documents required by the maritime rules and regulations, both local and international.—
Caseñas claimed that his transfer was due to the fact that MV Perseverance could not
leave port because of incomplete documents for its operation. This was not disputed. To
the mind of the Court, having incomplete documents for the vessel’s operation renders it
unseaworthy. While seaworthiness is commonly equated with the physical aspect and
condition of the vessel for voyage as its ability to withstand the rigors of the sea, it must
not be forgotten that a vessel should be armed with the necessary documents required by
the maritime rules and regulations, both local and international. It has been written that
vessel seaworthiness further extends to cover the documents required to ensure that the
vessel can enter and leave ports without problems. Accordingly, Caseñas’ contract should
have been terminated and he should have been repatriated to the Philippines because a
seafarer cannot be forced to sail with an unseaworthy vessel, pursuant to Section 24 of
the POEA-SEC. There was, however, no showing that his contract was terminated by
reason of such transfer. It is necessary to reiterate that MV Haitien Pride appears to be
manned by, and accredited with, the same principal/agency. His joining the said vessel
could only mean that it was for the purpose of completing his contract as the transfer was
made well within the period of his employment contract on board MV Perseverance.

Labor Law; Seafarers; Disability Benefits; Temporary Total Disability; For the duration
of the treatment but in no case to exceed 120 days, the seaman is on temporary total
disability as he is totally unable to work. He receives his basic wage during this period
until he is declared fit to work or his temporary disability is acknowledged by the
company to be permanent, either partially or totally.—In Magsaysay Maritime
Corporation vs. NLRC, 699 SCRA 197 (2013), citing Vergara vs. Hammonia Maritime
Services, Inc., 567 SCRA 610 (2008), the Court reiterated that the seafarer, upon sign-off
from his vessel, must report to the company-designated physician within three (3) days
from arrival for diagnosis and treatment. For the duration of the treatment but in no case
to exceed 120 days, the seaman is on temporary total disability as he is totally unable to
work. He receives his basic wage during this period until he is declared fit to work or his
temporary disability is acknowledged by the company to be permanent, either partially or
totally, as his condition is defined under the POEA-SEC and by applicable Philippine
laws. If the 120 days initial period is exceeded and no such declaration is made because
the seafarer requires further medical attention, then the temporary total disability period
may be extended up to a maximum of 240 days, subject to the right of the employer to
declare within this period that a partial or total disability already exists. The seaman may,
of course, also be declared fit to work at any time such declaration is justified by his
medical condition. APQ Shipmanagement Co., Ltd. vs. Caseñas, 725 SCRA 108, G.R.
No. 197303 June 4, 2014
G.R. No. 109583. September 5, 1997.*

TRANS ACTION OVERSEAS CORPORATION, petitioner, vs. THE HONORABLE

SECRETARY OF LABOR, ROSELLE CASTIGADOR, JOSEFINA MAMON,
JENELYN CASA, PEACHY LANIOG, VERDELINA BELGIRA, ELMA FLORES,
RAMONA LITURCO, GRACE SABANDO, GLORIA PALMA, AVELYN ALVAREZ,
CANDELARIA NONO, NITA BUSTAMANTE, CYNTHIA ARANDILLO, SANDIE
AGUILAR, DIGNA PANAGUITON, VERONICA BAYOGOS, JULIANITA
ARANADOR, LEONORA CABALLERO, NANCY BOLIVAR, NIMFA BUCOL,
ZITA GALINDO, ESTELITA BIOCOS, MARJORIE MACATE, RUBY SEPULVIDA,
ROSALIE SONDIA, NORA MAQUILING, PAULINA CORDERO, LENIROSE
ABANGAN, SELFA PALMA, ANTONIA NAVARRO, ELSIE PENARUBIA, IRMA
SOBREQUIL, SONY JAMUAT, CLETA MAYO, respondents.
Labor Law; Power to suspend or cancel any license or authority to recruit employees for
overseas employment is vested upon the Secretary of Labor and Employment.—The
power to suspend or cancel any license or authority to recruit employees for overseas
employment is vested upon the Secretary of Labor and Employment.

Same; The power conferred upon the Secretary of Labor and Employment echoed in
People vs. Diaz.—This power conferred upon the Secretary of Labor and Employment
was echoed in People v. Diaz, viz.: “A non-licensee or non-holder of authority means any
person, corporation or entity which has not been issued a valid license or authority to
engage in recruitment and placement by the Secretary of Labor, or whose license or
authority has been suspended, revoked or cancelled by the POEA or the Secretary.”

Same; The power to suspend or cancel any license or authority to recruit employees for
overseas employment is concurrently vested with the POEA and the Secretary of Labor.
—In view of the Court’s disposition on the matter, we rule that the power to suspend or
cancel any license or authority to recruit employees for overseas employment is
concurrently vested with the POEA and the Secretary of Labor. Trans Action Overseas
Corp. vs. Secretary of Labor, 278 SCRA 584, G.R. No. 109583 September 5, 1997
DELIA D. ROMERO, petitioner, vs. PEOPLE OF THE PHILIPPINES, ROMULO
PADLAN and ARTURO SIAPNO, respondents.

Criminal Law; Labor Law; Illegal Recruitment; Definition of “Recruitment and

Placement.”—Article 13 (b) of the same Code defines, “recruitment and placement” as:
“any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring
workers, and includes referrals, contract services, promising or advertising for
employment, locally or abroad, whether for profit or not: Provided, that any person or
entity which, in any manner, offers or promises for a fee, employment to two or more
persons shall be deemed engaged in recruitment and placement.”

Same; Same; Same; Elements of the Crime of Illegal Recruitment.—The crime of illegal
recruitment is committed when two elements concur, namely: (1) the offender has no
valid license or authority required by law to enable one to lawfully engage in recruitment
and placement of workers; and (2) he undertakes either any activity within the meaning
of “recruitment and placement” defined under Article 13 (b), or any prohibited practices
enumerated under Article 34 of the Labor Code.

Same; Same; Same; When is a person deemed a non-licensee or non-holder of authority.

—Under the first element, a non-licensee or non-holder of authority is any person,
corporation or entity which has not been issued a valid license or authority to engage in
recruitment and placement by the Secretary of Labor, or whose license or authority has
been suspended, revoked or cancelled by the POEA or the Secretary.
Same; Same; Same; In illegal recruitment cases, the failure to present receipts for money
that was paid in connection with the recruitment process will not affect the strength of the
evidence presented by the prosecution as long as the payment can be proved through
clear and convincing testimonies of credible witnesses.—As to petitioner’s contention
that the testimony of Arturo Siapno that the latter paid a certain amount of money to the
former must not be given any credence due to the absence of any receipt or any other
documentary evidence proving such, the same is without any merit. In People v. Alvarez,
387 SCRA 448 (2002), this Court ruled that in illegal recruitment cases, the failure to
present receipts for money that was paid in connection with the recruitment process will
not affect the strength of the evidence presented by the prosecution as long as the
payment can be proved through clear and convincing testimonies of credible witnesses.

Same; Same; Penalties; The penalty for illegal recruitment is imprisonment of not less
than four (4) years but not more than eight (8) years or a fine of not less than P20,000.00
nor more than P100,000.00 or both such imprisonment and fine at the discretion of the
court.—Under Article 39 (c) of the Labor Code, which prescribes the penalty for illegal
recruitment, any person who is neither a licensee nor a holder of authority under the law
and found violating any provision thereof or its implementing rules and regulations shall,
upon conviction thereof, suffer the penalty of imprisonment of not less than four (4) years
but not more than eight (8) years or a fine of not less than P20,000.00 nor more than
P100,000.00 or both such imprisonment and fine, at the discretion of the court. Clearly,
the trial court, by imposing a straight penalty, disregarded the application of the
Indeterminate Sentence Law. In Argoncillo v. Court of Appeals, 292 SCRA 313 (1998),
this Court ruled that the application of the Indeterminate Sentence Law is mandatory to
both the Revised Penal Code and the special laws. Romero vs. People, 661 SCRA 143,
G.R. No. 171644 November 23, 2011
G.R. Nos. 182978-79. April 7, 2009.*

BECMEN SERVICE EXPORTER AND PROMOTION, INC., petitioner, vs. SPOUSES

SIMPLICIO and MILA CUARESMA (for and in behalf of their daughter, Jasmin G.
Cuaresma), WHITE FALCON SERVICES, INC. and JAIME ORTIZ (President, White
Falcon Services, Inc.), respondents.
G.R. Nos. 184298-99. April 7, 2009.*
SPOUSES SIMPLICIO and MILA CUARESMA (for and in behalf of their daughter,
Jasmin G. Cuaresma), petitioners, vs. WHITE FALCON SERVICES, INC. and
BECMEN SERVICE EXPORTER AND PROMOTION, INC., respondents.
Civil Law; Contracts; As a rule, stipulations in an employment contract not contrary to
statutes, public policy, public order or morals have the force of law between the
contracting parties.—The terms and conditions of Jasmin’s 1996 Employment Agreement
which she and her employer Rajab freely entered into constitute the law between them.
As a rule, stipulations in an employment contract not contrary to statutes, public policy,
public order or morals have the force of law between the contracting parties.

Same; Same; The agreement does not include provisions for insurance, or for accident,
death or other benefits that the Cuaresmas seek to recover.—The agreement does not
include provisions for insurance, or for accident, death or other benefits that the
Cuaresmas seek to recover, and which the labor tribunals and appellate court granted
variably in the guise of compensatory damages.

Same; Same; Damages; While the Court has emphasized the need to observe official
work time strictly, what an employee does on free time is beyond the employer’s sphere
of inquiry.—We cannot expect that the foreign employer should ensure her safety even
while she is not on duty. It is not fair to require employers to answer even for their
employees’ personal time away from work, which the latter are free to spend of their own
choosing. Whether they choose to spend their free time in the pursuit of safe or perilous
undertakings, in the company of friends or strangers, lovers or enemies, this is not one
area which their employers should be made accountable for. While we have emphasized
the need to observe official work time strictly, what an employee does on free time is
beyond the employer’s sphere of inquiry.

Same; Same; Same; Court cannot subscribe to the idea that Jasmin committed suicide
while halfway into her employment contract.—The Court cannot subscribe to the idea
that Jasmin committed suicide while halfway into her employment contract. It is beyond
human comprehension that a 25-year old Filipina, in the prime of her life and working
abroad with a chance at making a decent living with a high-paying job which she could
not find in her own country, would simply commit suicide for no compelling reason.

Labor Law; Migrant Workers and Overseas Filipinos Act of 1995; Under Republic Act
No. 8042, or the Migrant Workers and Overseas Filipinos Act of 1995, the State shall, at
all times, uphold the dignity of its citizens whether in country or overseas, in general, and
Filipino migrant workers, in particular.—Under Republic Act No. 8042 (R.A. 8042), or
the Migrant Workers and Overseas Filipinos Act of 1995, the State shall, at all times,
uphold the dignity of its citizens whether in country or overseas, in general, and Filipino
migrant workers, in particular. The State shall provide adequate and timely social,
economic and legal services to Filipino migrant workers. The rights and interest of
distressed overseas Filipinos, in general, and Filipino migrant workers, in particular,
documented or undocumented, are adequately protected and safeguarded.

Same; Same; Recruitment agencies are expected to extend assistance to their deployed
Overseas Filipino Workers (OFWs) especially those in distress.—Becmen and White
Falcon, as licensed local recruitment agencies, miserably failed to abide by the provisions
of R.A. 8042. Recruitment agencies are expected to extend assistance to their deployed
OFWs, especially those in distress. Instead, they abandoned Jasmin’s case and allowed it
to remain unsolved to further their interests and avoid anticipated liability which parents
or relatives of Jasmin would certainly exact from them. They willfully refused to protect
and tend to the welfare of the deceased Jasmin, treating her case as just one of those
unsolved crimes that is not worth wasting their time and resources on.

Same; Same; More than just recruiting and deploying Overseas Filipino Workers (OFWs)
to their foreign principals, recruitment agencies have equally significant responsibilities.
—More than just recruiting and deploying OFWs to their foreign principals, recruitment
agencies have equally significant responsibilities. In a foreign land where OFWs are
likely to encounter uneven if not discriminatory treatment from the foreign government,
and certainly a delayed access to language interpretation, legal aid, and the Philippine
consulate, the recruitment agencies should be the first to come to the rescue of our
distressed OFWs since they know the employers and the addresses where they are
deployed or stationed. Upon them lies the primary obligation to protect the rights and
ensure the welfare of our OFWs, whether distressed or not. Who else is in a better
position, if not these recruitment agencies, to render immediate aid to their deployed
OFWs abroad?

Same; Same; Same; Rajab, Becmen and White Falcon’s acts and omissions are against
public policy because they undermine and subvert the interest and general welfare of our
Overseas Filipino Workers (OFWs) abroad who are entitled to full protection under the
law.—Rajab, Becmen and White Falcon’s acts and omissions are against public policy
because they undermine and subvert the interest and general welfare of our OFWs
abroad, who are entitled to full protection under the law. They set an awful example of
how foreign employers and recruitment agencies should treat and act with respect to their
distressed employees and workers abroad. Their shabby and callous treatment of Jasmin’s
case; their uncaring attitude; their unjustified failure and refusal to assist in the
determination of the true circumstances surrounding her mysterious death, and instead
finding satisfaction in the unreasonable insistence that she committed suicide just so they
can conveniently avoid pecuniary liability; placing their own corporate interests above of
the welfare of their employee’s—all these are contrary to morals, good customs and
public policy, and constitute taking advantage of the poor employee and her family’s
ignorance, helplessness, indigence and lack of power and resources to seek the truth and
obtain justice for the death of a loved one.
Same; Same; Same; Whether employed locally or overseas, all Filipino workers enjoy the
protective mantle of Philippine labor and social legislation, contract stipulations to the
contrary notwithstanding.—Whether employed locally or overseas, all Filipino workers
enjoy the protective mantle of Philippine labor and social legislation, contract stipulations
to the contrary notwithstanding. This pronouncement is in keeping with the basic public
policy of the State to afford protection to labor, promote full employment, ensure equal
work opportunities regardless of sex, race or creed, and regulate the relations between
workers and employers. This ruling is likewise rendered imperative by Article 17 of the
Civil Code which states that laws which have for their object public order, public policy
and good customs shall not be rendered ineffective by laws or judgments promulgated, or
by determinations or conventions agreed upon in a foreign country.

Same; Same; Same; In case of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the laborer.—The relations between
capital and labor are so impressed with public interest, and neither shall act oppressively
against the other, or impair the interest or convenience of the public. In case of doubt, all
labor legislation and all labor contracts shall be construed in favor of the safety and
decent living for the laborer.

Same; Same; Same; Private employment agencies are held jointly and severally liable
with the foreign-based employer for any violation of the recruitment agreement or
contract of employment.—Private employment agencies are held jointly and severally
liable with the foreign-based employer for any violation of the recruitment agreement or
contract of employment. This joint and solidary liability imposed by law against
recruitment agencies and foreign employers is meant to assure the aggrieved worker of
immediate and sufficient payment of what is due him. If the recruitment/placement
agency is a juridical being, the corporate officers and directors and partners as the case
may be, shall themselves be jointly and solidarily liable with the corporation or
partnership for the aforesaid claims and damages. Becmen Service Exporter and
Promotion, Inc. vs. Cuaresma, 584 SCRA 690, G.R. Nos. 182978-79 April 7, 2009